Japan’s government will start paying its companies to move factories out of China and back home or to Southeast Asia, part of a new program to secure supply chains and reduce dependence on manufacturing in China.
Fifty-seven companies including privately-held facemask-maker Iris Ohyama Inc. and Sharp Corp. will receive a total of 57.4 billion yen ($536 million) in subsidies from the government, the Ministry of Economy, Trade and Industry said Friday. Another 30 firms will receive money to move manufacturing to Vietnam, Myanmar, Thailand and other Southeast Asian nations, according to a separate announcement, which didn’t provide details on the amount of compensation.
The government will pay a total of 70 billion yen in this round, the Nikkei newspaper reported. The payments come from 243.5 billion yen that the government earmarked in April to reduce reliance on Chinese supply chains, with the money aimed at helping companies shift factories back home or to other nations.
As U.S.-China relations deteriorate and the trade war worsens, there’s been increasing discussions in the U.S. and elsewhere about how to “decouple” economies and firms from China. Japan’s decision is similar to a Taiwanese policy in 2019, which was aimed at bringing investment back home from China. So far, no other country has enacted a concrete policy to encourage the shift.
China is Japan’s biggest trading partner under normal circumstances and Japanese companies have massive investments there. The outbreak of the coronavirus pandemic has damaged those economic ties as well as China’s image in Japan. The government of Prime Minister Shinzo Abe has been trying for years to improve relations with China after anti-Japan riots in 2012, but the fallout from the pandemic and the ongoing territorial dispute over islands and gas fields in the East China Sea have undercut those efforts.
WW3 warning: Japan planning rapid increase in armed forces to combat China’s aggression
Tokyo revealed it is considering a huge increase to its defence capabilities as it accused China of pushing territorial claims amid growing tensions in the region. The East Asia nation released its annual defence review, where said Beijing has been pushing its territorial claims amid the coronavirus pandemic.
The nation said it suspected China of spreading propaganda and disinformation as it provides medical aid to nations fighting COVID-19.
In a defence white paper approved by Prime Minister Shinzo Abe’s government, Japan said China “is continuing to attempt to alter the status quo in the East China Sea and the South China Sea”.
The white paper said: “Japan must strengthen its defence capability at speeds that are fundamentally different from the past.
“China has relentlessly continued unilateral attempts to change the status quo by coercion in the sea area around the Senkaku islands, leading to a grave matter of concern.”
The white paper described “relentless” intrusions in waters around a group of islets claimed by both nations in the East China Sea, known as the Senkaku in Japan and the Diaoyu in China.
In the South China Sea, Japan said Beijing was asserting territorial claims by establishing administrative districts around disputed islands, that forced countries distracted by the coronavirus outbreak to respond.
Such disinformation included online claims that the coronavirus was brought to China by a US military member, or that Chinese herbal remedies could treat COVID-19, a defence ministry official said at a briefing.
Other threats faced by Japan include North Korea’s ongoing development of nuclear weapons and ballistic missiles as well as a resurgence of military activity by Russia in the skies and waters in Japan, at times in joint drills with China, the defence review said.