Japanese industry giants step up move overseas

Tokyo: Japan's big manufacturers are speeding up their move overseas, in a sign they see the strong yen as a long-term handicap rather than a temporary blip, as they struggle to compete with nimble Asian rivals.

A sluggish home market and energy shortages following the widespread nuclear power shutdown sparked by the March 11 earthquake and ensuing atomic crisis are also tipping the balance towards investment abroad.

Panasonic is planning its first solar factory outside Japan, sources said yesterday, while Suzuki Motor said it was seeking to double auto production at its joint venture in China by 2015.

Rival carmakers Toyota and Nissan also said on Thursday that exchange rates were forcing them to consider changes in their own production plans.

"I think we are reaching the limit for manufacturing in Japan," said Yuuki Sakurai, president of Fukoku Asset Management in Tokyo.

"In future, companies may be registered in Japan and have their head office here, but it could be that most people they employ are not Japanese and most of their production doesn't take place in Japan."

The Japanese currency was trading at about 77 yen to the dollar yesterday, compared with levels around 90 yen two years ago.

Value slashed

The euro has tumbled to about 104 yen, compared with about 134 yen in Nov-ember 2009, slashing the value of overseas revenues brought home to Japan by export-reliant firms. Manufacturers say there is little prospect of increasing procurement in euros to offset the pain.

Panasonic, for example, has said the strong yen will cut its operating profit by 28 billion yen (Dh1.3 billion) in the year to March 2013.

Panasonic's new solar plant in Malaysia is set to cost 40-50 billion yen, according to sources, with news of the investment coming just weeks after the firm revealed it was dropping a plan to convert a TV panel plant in Japan for solar panel production.

"We were considering increasing solar production capacity by converting our number three panel plant," Panasonic President Fumio Ohtsubo told a news conference last month.

"But there was no reason for an aggressive expansion at this plant, given that the exchange rate situation is completely different from two years ago, and that we have grave concerns about power shortages," he added.

"All things considered, there is more merit to manufacturing overseas than in Japan."