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Smaller Japan Companies Shifting Business Abroad

Thu, 12/13/2012 - 11:22am
The Associated Press

TOKYO, Dec. 13 (Kyodo) — Small and medium-sized Japanese companies are following bigger ones in shifting their business bases overseas in the face of a stagnant economy at home, with more emphasis on Southeast Asian countries than China.

One example is seen in Hamamatsu in the central Japanese prefecture of Shizuoka, which flourished as a production center after giving birth to companies including Honda Motor Co., Suzuki Motor Corp. and Yamaha Corp.

Given a sharp fall in orders from major companies to local smaller ones following relocation by the former of factories overseas, 10 small and midsize companies in Hamamatsu set up a cooperative association in fall last year to jointly enter the Southeast Asian market.

"Unit prices have been falling. We can't survive if this goes on," said Hironori Masuda, head of the association. "We will tap the overseas market by helping one another aboard a ship called 'association.'"

Officials of the association, whose members range from transport and construction to temporary staff service companies, visited Indonesia in October and began considering renting space from a Japanese university's local office.

The Hamamatsu city office was wary that local companies' expansion of their businesses overseas could lead to a hollowing out of local industries, but it is now changing its stance to a supporting one for those desiring to do business overseas.

"As long as they go overseas, we want them to be successful and share their earnings with Hamamatsu in the forms of investment and employment," said an official of the city office's industrial promotion division.

The latest wave of Japanese companies' advance into the Southeast Asian market reflects concern over concentrating their business bases in China, where wages surged in recent years and massive, violent anti-Japanese demonstrations raged in September due to a territorial dispute.

Japanese companies are now looking at Southeast Asian countries while keeping China at a distance, under the so-called "China-plus-one" strategy. The attraction of Southeast Asian countries is also increasing due to their strengthening purchasing power especially for cars and motorbikes on the back of a growing middle class.

In countries such as Indonesia, Thailand and Vietnam, inquiries from Japanese firms about industrial complexes are increasing, according to Jun Iijima, a Sumitomo Corp. official engaged in operations related to overseas factory complexes.

"They were all empty until three years ago, but now most of them have been taken," Iijima said of an industrial complex in West Java, Indonesia, which Sumitomo sells as an agent, adding that expansion of necessary sites for the complex cannot keep up with demand.

Sumitomo offers a series of services for companies tapping into the overseas market, together with its offer of industrial complexes, such as giving advice on local labor issues and translation services, sometimes lobbying local governments on behalf of Japanese companies.

"We offer support to enable companies to fully concentrate on their manufacturing work," Iijima said, adding that rental factories for small and midsize firms are especially popular and they are taken soon after completion.

A number of companies are fleeing Japan partly due to their discontent with the nation's lawmakers who they believe failed to fully address the issues of the yen's strength and delayed trade liberalization. They also cite concerns over power supplies following the 2011 Fukushima Daiichi nuclear disaster, which led to the closure of most nuclear reactors in Japan.

An executive of an automotive parts maker said, "I can't find a reason to keep making things in Japan if things stay as they are now. I wonder how much of this reality politicians understand."

 

 

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