A clear consequence of Covid-19; Japanese administration is encouraging their firms to move production plants out of China and into Southeast Asia to end supply dependency on the nation.
09 April 2020, news agencies in Japan reported that Japan will spend 2.2 billion dollars to pull Japanese manufacturing out of China. The budget forms part of a 989 billion dollar stimulus package designed to stave off recession.
In today’s economy, Japan has a significant reliance on imports of China made products and components. However, all projections lead to the inevitable conclusion that like almost every other first world country, Japan’s economy too will end in recession for 2020. Asian imports is predicted to drop by as much as 31%. The GDP of Asian countries may drop by more than 7%.
Fearing a backlash of deteriorating relationships between Beijing and Washington, it is reported that several Japanese firms were also considering alternative sources and a study byTokyo Shoko Research indicated that Japanese firms had already started looking for alternative sources for components in February.
While the move brings opportunity for Asia, particularly South East Asian countries – it remains to be seen if manufacturing quality and costs can match up to the requirements of Japanese manufacturing. If alternative sources are not able to provide the same volume of output at competitive costs while maintaining quality, Japanese manufacturers will still have to go back to China sources after the buoyancy provided by stimulus packages runs out.
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