Japan has set apart the equivalent of US$2.2 billion of its COVID-19 stimulus package to incentivize its manufacturers to bring production back from China as the coronavirus interrupts trade between the two east Asian nations.
The budget, put together in response to the viral crisis, includes 220 billion yen (US$2 billion) for companies who agree to move their production back to Japan, along with 23.5 billion yen for those seeking to move their production from China to other countries other than Japan.
The move comes as the two nations were in the process of strengthening their trade ties. Chinese President Xi Jinping was scheduled for a state visit to Japan early this month — the first visit of its kind in a decade. But the visit was canceled amid the coronavirus outbreak and no new date has been announced.
China is currently Japan’s top trading partner under normal circumstances, but imports from China fell by nearly half in February as the disease forced the closure of factories, depriving Japanese manufacturers of key building components.
This has renewed discussion of reducing Japan’s reliance on China for its manufacturing needs. A Japanese government panel on future investment last year highlighted the need to increase the production of high-added value products domestically and for other goods to be diversified across Southeast Asia.
“There will be something of a shift,” said Shinichi Seki, an economist at the Japan Research Institute. He noted that some Japanese firms conducting their manufacturing in China have already been thinking about moving out. “Having this in the budget will definitely provide an impetus.”
But car makers and other companies that manufacture for the Chinese domestic market are likely to stay where they are, Seki said.
Japan exports a bigger share of its parts and partially finished goods to China than other leading industrial nations, according to data compiled by the panel.
A survey by Tokyo Shoko Research release in February found that 37 percent of the over 2,600 companies to respond were diversifying their procurement to places apart from China in response to the crisis.
This shift may affect Prime Minister Shinzo Abe’s effort to fix relations with China.
“We are doing our best to resume economic development,” Foreign Ministry spokesman Zhao Lijian said during a briefing. “In this process, we hope other countries will act like China and take proper measures to ensure the world economy will be impacted as little as possible and to ensure that supply chains are impacted as little as possible.”
When the coronavirus first broke out in China, Japan provided aid to the communist state in the form of masks and protective gear, earning praise from Beijing.
In another measure against the disease, China declared the Japan-produced antiviral Avigan to be an effective coronavirus treatment.
Despite the gestures of goodwill, many in Japan blame China for mishandling the outbreak in its early stages and believe Abe should have blocked entry to Chinese visitors sooner.
Other longtime disagreements, such as a territorial dispute over East China Sea islands that nearly resulted in a military clash in 2012 and 2013, remain unresolved.
Chinese government ships have continued patrolling the Japanese-administered islands during the viral panic. Four Chinese ships reportedly entered Japanese waters this week.
Japan isn’t the only nation that’s reconsidering its reliance on Chinese manufacturing in light of the pandemic.
In the United States, there has been growing demand to take manufacturing out of China in light of deficiencies in America’s medical supply chain.
“One of the things that this crisis has taught us, sir, is that we are dangerously overdependent on a global supply chain,” said Trump economic adviser Pete Navarro during a White House press briefing. “Never again should we rely on the rest of the world for our essential medicines and countermeasures.”
Britain’s Brexit Party leader, Nigel Farage, has argued that Chinese interests seek to use the coronavirus to gain control of large segments of the UK economy. Just last month, Chinese Jingye Group bought out British Steel.
Navarro summed it up: “What we’re learning from that is that no matter how many treaties you have, no matter how many alliances, no matter how many phone calls, when push comes to shove you run the risk, as a nation, of not having what you need.”
Photo: theasis/iStock/Getty Images Plus
Luis Miguel is a marketer and writer whose journalistic endeavors shed light on the Deep State, the immigration crisis, and the enemies of freedom. Follow his exploits on Facebook, Twitter, Bitchute, and at luisantoniomiguel.com.