The Japanese government has pledged JPY 57.4 billion (USD 535 million) in subsidies to help 57 firms invest in domestic production.

A further 30 companies will also receive support from the Japanese government to diversify their foreign supply chain production by moving manufacturing operations from China to other Southeast Asian countries.

The policy, which was announced last Friday by the Ministry of Economy, Trade, and Industry (METI), aims to strengthen Japan’s domestic supply chain and reduce dependence on Chinese manufacturing bases, especially in light of anticipated logistics disruptions that further COVID-19 outbreaks may cause.

Face mask manufacturer Iris Ohyama, one of the recipients of the domestic production subsidy, has announced it has already refurbished a factory in the Miyagi Prefecture and has ambitious plans to produce 150 million masks domestically every month.

Sharp Corp., which will also receive government subsidies, has said it will begin producing non-woven fabric domestically for its face mask production, according to Reuters, further reducing Japan’s reliance on China-based supply chains.

Earlier this year, Japan allocated JPY 243.5 billion (USD 2.271 billion) to help Japanese firms migrate out of China – primarily to Japan, but also to other countries. The budget constitutes part of the country’s third coronavirus economic stimulus package, worth JPY 117 trillion (USD 1.1 trillion), which is intended to support businesses and bolster employment levels.

Japan, which has historically been very reliant on China, has seen the coronavirus pandemic erode its foreign ties with China – once its biggest trading partner. The outbreaks in February caused many Chinese factories to close, nearly halving Chinese imports to Japan. In addition, the virus also saw Japan shun Chinese tourists  – who made up 30.1% of the country’s inbound visitors in 2019, according to the Japan National Tourism Organisation (JNTO) – earlier this year for fear of contracting the illness.

China-Japan relations have also soured recently in light of territorial disputes over the East China Sea islands – the Diaoyu, or Senkaku, islands.


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