The government of Japan has decided to give subsidies worth 57.4 billion yen or roughly $536 million to companies ready to shift production to Japan. It will enable them to invest in factories in Japan and Southeast Asia. Japan is one of the largest trading partners of China. In a bid to reduce manufacturing dependency on China, Japan has decided to encourage firms to invest in factories outside China. The step is similar to what Taiwan did in 2019 to bring back investment from China.
As per the reports, 57 companies that include facemask-maker Iris Ohyama Inc. or Sharp Corp will get benefits from this plan. The Ministry of Economy, Trade and Industry, Japan made the announcement on 18th July about the subsidies. The government, in another announcement, said that they would also assist additional 30 firms in investing in Vietnam, Thailand, Myanmar and other southeast Asian countries.
Though METI did not name China in the statement, in March Shinzo Abe, Prime Minister, Japan, said that they need to bring production back home or diversify their investment to ASEAN nations. It is essential to cut reliance on one country. Nikkei had reported that the government would pay a total of 70 billion yen in the first round. In April, the government announced 220 billion yen to help companies shift their factories outside China. In the report, it was mentioned that the firms will source the raw material for their products from local vendors instead of getting them from suppliers from China and other countries.
Japan and China’s relationship remained stable over the past few decades. However, coronavirus pandemic and China’s aggressive attitude in the South China Sea have forced Japan to take strong steps against China. The US and China relations are getting worse amid the trade war. President Trump had announced several restrictions on Chinese companies including Huewai in the past few months. India is also cutting ties with Chinese companies. Under Aatma Nirbhar Bharat campaign, Prime Minister Modi has urged the citizens to buy and promote products manufactured locally. India has also ended contracts with several Chinese companies in the background of Galwan valley faceoff.