10 out of 10 Japanese Companies Say They Will Reduce Overseas Production... Moving to Overcome Supply Chain Crisis

According to a survey, one out of ten Japanese companies is considering reducing the proportion of overseas production over the next five years.

On the 6th, Nihon Keizai Shimbun reported that a survey conducted by the Japanese Cabinet Office in 2022 targeting listed companies found that 10.5% of manufacturing companies plan to reduce their overseas production ratio over the next five years. This is the highest response rate since the survey began in 1987 and represents a 7 percentage point increase compared to 2012, ten years ago.

The percentage of companies planning to increase their overseas production ratio recorded 37%, a 23 percentage point decrease from 2012.

By industry, the intention to reduce overseas production was highest in electronic devices (21%), textile products (15%), and glass processing (14%).

Toyota Factory in Aichi Prefecture, Japan

The reason Japanese companies want to increase domestic production is due to significant disruptions in product manufacturing caused by supply chain instability triggered by COVID-19. Nihon Keizai stated, "Until now, many Japanese companies have increased their overseas production ratio for reasons such as cost reduction," but added, "Watching the spread of supply chain instability caused by COVID-19 and Russia's invasion of Ukraine, there is a growing movement to avoid dispersion."

Moreover, as U.S.-China tensions intensify, concerns that deteriorating relations with China could disrupt parts procurement appear to have influenced decisions to reduce overseas production ratios.

According to Nihon Keizai, Yaskawa Electric, which produces industrial equipment, plans to establish a new factory in Japan by 2027 to reduce dependence on parts from China. Daikin Industries, a Japanese air conditioner manufacturer, is also diversifying its parts supply chain to Southeast Asia and other regions in preparation for a situation where parts cannot be procured from China.

However, for companies aiming to reduce overseas production, labor shortages caused by low birthrates and an aging population are expected to be challenges that need to be addressed. Nihon Keizai added, "In Japan, population decline is progressing, making securing labor a challenge," and emphasized, "It is necessary to build high productivity through automation and other means."

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