Since June, recruiters from at least seven Chinese provinces have hosted events in Japan. Vietnam came with a 20-person mission. Burma sent more than 300 representatives. One official from Zheziang province in China described it as a “rare opportunity” to lure Japanese businesses that are strained by the rising yen, high corporate taxes and a shrinking domestic market.
The prospect that companies big and small will relocate amplifies concerns about the world’s third-largest economy, as it tries to break a two-decade run of stagnation and rebuild its disaster-hit northeastern coastline. Politicians and business leaders fear a scenario in which major manufacturers, though maintaining a baseline presence in Japan, will build factories overseas and depend increasingly on local suppliers in their new countries; then, the smaller Japanese companies that once depended on those manufacturers will either cut costs to compete or move overseas themselves.
In his first major speech, Prime Minister Yoshihiko Noda said this month that the soaring yen and the rise of emerging economies had created “an unprecedented industrial hollowing-out crisis” that could lead to lost jobs and weakened Japanese competitiveness.
“Japan is on the verge of suffering a major loss of national credibility due to the hollowing-out of its industries,” Noda said.
Many companies say they have been approached with offers to begin operations overseas. The invitations, according to government data, come mainly from China and several Southeast Asian countries — especially Thailand and Singapore. Firms have also received offers from provinces in South Korea, even though Seoul has tried this summer to curb the recruitment of Japanese companies, thinking it inconsiderate in the aftermath of the March 11 disaster.
Attempts to poach Japanese companies is hardly new. Neither is Japanese interest in Asia’s developing markets, with many export-reliant giants — Toyota, Panasonic and Sony — building regional networks. What was once a business opportunity, though, has turned into a business necessity: Firms now relocate to China and Southeast Asia not merely to reach new markets, but rather to offset the pain in Japan.
That pain comes largely from the yen, whose value has soared this year amid concern about the U.S. and European economies. Investors see the yen as a safe bet, and they have managed in a short time to transform its worth. In April, the yen was valued at about 85 against the dollar. On Sept. 19, it was 75.94 against the dollar, a post-World War II high, and so far, Japanese policymakers have been helpless to stem the rise. The strong yen makes Japanese exports more expensive overseas and it pinches foreign-made profits when they are repatriated.