According to a new poll by the Japan Bank for International Cooperation, a record proportion of manufacturers will strengthen or expand foreign operations.
Meanwhile, a separate Ministry of Finance survey focusing on manufacturers' domestic capital spending shows a 1.6% YoY decline for the July to September 2011 quarter, raising the prospect of faster erosion of Japanese industry.
A full 87.2% of respondents to the JBIC survey said that they plan to strengthen or expand foreign operations, up 4.4 per tonneage points from the previous year. But a record low 25.9% said the same for domestic operations.
Conducted from July to September, the survey drew responses from 603 manufacturers with multiple facilities abroad. Plans for overseas expansion were most prevalent in the chemical industry, at 92.1%, followed by the automotive industry at 91.6% and precision machinery at 88.6%.
Manufacturers expect foreign facilities to account for 34.2% of total production in fiscal 2011, an all time high and 38.5% in fiscal 2014. Looking ahead to fiscal 2014, the electronics industry sees 53.7% of production taking place abroad, making it the first industry to top the 50% mark.
Corporations have complained about the high cost of doing business in Japan, with its steep tax rate and its foot dragging on free trade. As the strong yen and unease over the power supply add more pressure, Japanese manufacturers are by all accounts stepping up their globalization. Some are dipping into cash reserves and taking advantage of the strong domestic currency for mergers and acquisitions.
While post disaster reconstruction offers some hope for increased domestic investment, the strong yen and the uncertain economic outlook overseas appear to be holding back active corporate spending.
Still, there is little indication that manufacturers are preparing to make bold cutbacks to home-country operations. Of JBIC survey respondents planning overseas expansions, 90% said they would either maintain the status quo at domestic operations or strengthen them.
(Sourced from Nikkei)
