The Journal The Authority on Global Business in Japan

Cabinet Office
Is the time right to shift manufacturing?

The widening impact of the coronavirus pan­demic has led some in the Japanese govern­ment to seek a reevaluation of the nation’s industrial structure, which has come to depend heavily on China as a generation source. China accounts for 21.1 percent of Japan’s imports of intermediate goods and 24.7 percent of its exports.

The Council on Investments for the Future, through which Prime Minister Shinzo Abe leads Japan’s growth strat­egies, is devising new guidelines to help move production bases back to Japan or third countries other than China.

Implementation of the guidelines, which may well be expedited by the government’s coronavirus measures, is designed to accom­modate the segmentation of economic acti­­vities expected as the seemingly inevitable struggle for hegemony heats up between the United States and China.

That said, in the face of concerns raised by many Japanese manufacturers that are heavily invested in China, the government may not proceed as planned. A council official was heard to say: “Suffi­cient measures haven’t been adopted. Unless structural changes take place, it is likely to be a case of forgetting the risk as soon as the crisis passes.

As Covid-19 spread, production in China came to a stop, depriving Japanese manu­facturers of necessary components. Panasonic Corporation and Lixil Group Corporation saw orders for toilets and system kitchens temporarily halted, and Nissan Motor Co. Ltd. was forced to stop production at its Tochigi Plant and a subsidiary’s plant in Fukuoka Prefecture, on the island of Kyushu. Mean­while, production of some car models manu­factured by Honda Motor Co. Ltd., Suzuki Motor Corporation, and Mazda Motor Corporation was delayed.

To prevent further disruption to the supply chain, the government plans to promote the return to domestic manufacture of certain high-value-added products. Production of other goods can be shifted to Southeast Asia. These moves are to be financed by govern­ment-related institutions that will also support the automation of domestic plants using artificial intelligence and robotics to reduce production costs. The goal is for companies not to lose their international competitiveness.

Ministry of Internal Affairs and Communications
Will Huawei play a role in Japan’s 5G deployment?

Moves have begun toward adoption of 5G mobile communications technology. At the end of March, three major carriers—NTT DoCoMo Inc., KDDI Corporation, and Softbank Group Corp.—successively initi­ated the limited startup of 5G services. This is expected to be followed by deployment of local services utilizing 5G by companies, regional governments, and others. However, the Ministry of International Affairs and Communications, whose task is to promote the changeover, is not unruffled, due to an excess of problematic factors.

Thanks to minimal drops in transmission speed for large volumes of data and multiple connectivity support, the 5G standard is far superior to the current 4G. However, it faces a huge number of issues, including higher costs, complex deployment of base stations, and support for peri­pheral technologies. The ministry has stated high hopes that the technology can raise the competitiveness of Japan’s domestic industries, but with a slowing down of demand for smartphones, it believes the transition to 5G will not be as smooth as previous upgrades to 2G, 3G, and 4G.

China’s Huawei Technologies Co., Ltd., which has been banned by the US govern­ment from selling its technology there, has been lying in wait for the Japanese 5G market. Some observers sense moves below the surface by bureaucrats in the Japanese government. Even though the battle for the 5G market has only just begun, some questionable matters have already surfaced.

Despite the US ban, Huawei has been making inroads in some European markets and is likely to be recognized by the British government to set up 5G communications net­works for Vodafone or BT.

The main reason for Huawei’s strength is the considerably lower price of its base stations compared with other manufacturers.

The Japanese government has been largely in accord with the United States, and current guidelines exclude procurements from Huawei. But these restrictions have not been applied to procurements by private companies. NTT DoCoMo, nevertheless, has imposed its own self restraints on dealing with Huawei. While the ministry asserts, “We have no restrictions on private firms,” companies would be reluctant to run afoul of the government, since procurement of Huawei equipment would run the risk of being excluded from government business.

keizaikai magazine