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In the context of the Covid-19 pandemic warning about the danger of supply chain dependence in one region, especially China, companies have taken a keen interest in subsidies from the Japanese government. for returning production to the homeland. “
According to the Nikkei Asian Review, the government has allocated 220 billion yen ($ 2.07 billion) in the fiscal 2020 supplemental budget for Japan’s National Production Promotion Program.
During the first round of grants, which ended in June, the government approved 57 projects (more than half of the 90 projects registered) that returned to Japan with a total value of 57.4 billion yen. Another 30 companies have received support from another 23.5 billion yen program (separate from the other) focused on relocation in Southeast Asia.
The second presentation, which ended in July, received many more responses.
1,670 registrations worth 1.76 trillion yen call for the “exit from China”, 11 times the amount remaining in the budget. The companies will be selected in October after passing the expert evaluation round.
Although the government currently has no plans to spend extra money on the Program, several candidates seeking to succeed Shinzo Abe to become the new prime minister have mentioned measures to support diversification of the chain. supply.
Subsidies apply to companies that produce commodities that are important to public health or that are produced primarily in specific countries. Many previously approved projects involve masks and medical products. The subsidy covers a certain part of the cost, capped at 15 billion yen per project.
Ace Japan was among the companies that won the grant in the first round. The ingredient maker will begin construction early next summer at a factory in Yamagata prefecture.
Iris Ohyama, one of the first other companies to receive a subsidy, used her money to start exporting diversified national pages outside of China.
Showa Glove plans to start producing rubber gloves domestically from spring 2023, replacing around 10% of imports. The company sells gloves made abroad, mainly in Malaysia, but the pandemic has disrupted the company’s supply.
“Protection policies were common even before Covid-19 hit, but the impact of the pandemic made it faster,” said Yasuyuki Todo, an economics professor at Waseda University in Tokyo. “.
A representative of one of the subsidized companies admitted that “we made the decision to produce in the country even without subsidies.”
Subsidized projects tend to involve companies that diversify their production networks, to ensure more safety in an emergency, rather than simply shutting down operations. abroad and returned home.
In particular, China has gradually lost the appeal of a production base as labor costs have risen. In a 2019 survey of JETRO’s Japanese companies, Chinese production costs are currently around 80% of Japan’s, while those in Vietnam are only around 74%.
