Japan to Provide Financial Support Within the Year to Protect Shipbuilding Industry... "Countering Korea and China"

[Image source=EPA Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] On the 27th, the Yomiuri Shimbun reported that the Japanese government is preparing a plan to support its domestic shipbuilding industry through financial assistance. This is interpreted as an effort to counter South Korea and China, which are increasing their market share in the shipbuilding industry, and to secure transportation capacity.

According to the report, the Japanese government is preparing a shipbuilding industry promotion plan centered on financial support, aiming for implementation within the year. This plan includes financial support to enable shipping companies operating container ships or oil tankers to purchase ships from Japanese shipbuilders through special purpose companies (SPCs) established overseas. The support amount is expected to be in the hundreds of billions of yen (several trillion won) per case.

This financial support will be led by government-affiliated financial institutions. The Development Bank of Japan (DBJ) is expected to provide public guarantees to private banks lending money to the SPCs, or the Japan Bank for International Cooperation (JBIC) will directly lend to the SPCs. The Japanese government expects that this will lower the charter fees paid by shipping companies to the SPCs, ultimately revitalizing the domestic ship procurement market.

The Japanese government plans to use this system to protect its domestic shipbuilding industry base and enhance maritime transportation capacity while countering South Korea and China, which are increasing their market share in the global shipbuilding market. The market share of new ship orders for the Japanese shipbuilding industry fell to half in four years, from 32% in 2015 to 16% in 2019. A senior Japanese government official told Yomiuri, "If this continues, the Japanese shipbuilding industry may disappear, so the government has no choice but to extend a helping hand within the scope that does not violate WTO agreements," asserting the legitimacy of the financial support policy.

Previously, in November 2018, the Japanese government requested bilateral consultations under the World Trade Organization (WTO) dispute settlement procedures, claiming that the South Korean government was distorting market competition through financial support of about 1.2 trillion yen to large shipbuilding companies. Accordingly, the bilateral consultations held in Seoul a month later ended in failure as the South Korean government maintained that the restructuring of the shipbuilding industry was a legitimate policy implementation and did not violate WTO regulations.

Subsequently, the Japanese government could have requested the establishment of a panel, which corresponds to the first trial in the dispute settlement process, but showed no movement for over a year. However, in January, it revived the bilateral consultation card, reactivating the complaint procedure to check South Korea's shipbuilding industry promotion policy.

This content was produced with the assistance of AI translation services.