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In a strategic move designed to reduce the risk of single point-of-failure in the country’s manufacturing supply chain, the Japanese government has begun offering subsidies totaling 70 billion yen (US$653 million) to Japanese companies to move their factories out of China, and back to Japan or to neighboring ASEAN countries.

A total of fifty-seven companies have been earmarked to receive 57.4 billion yen (US$536 million) in aid from the government to shift their manufacturing back home while thirty companies will be subsidized to transfer their manufacturing bases from China to Vietnam, Myanmar, Thailand and other ASEAN countries. 

Companies listed by Japan’s Ministry of Economy, Trade and Industry as eligible for the initial financial support package include manufacturers in the aviation and automobile parts industries, as well as companies producing fertilizer, medicine and paper products. 

The Japanese government’s move-out subsidy comes from the 220 billion yen earmarked in the fiscal 2020 supplementary budget which will be used to encourage companies to bring back their manufacturing to Japan. 

The ongoing COVID-19 pandemic has shown how vulnerable global manufacturing is when it is focused in one country, particularly China. Japan’s move is seen to secure its supply chains as well as reduce manufacturing dependence in its largest trading partner.

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