Soaring Steel's demand provoked Japanese players to return home
Soaring Steel's demand provoked Japanese players to return home

Soaring Steel's demand provoked Japanese players to return home

  • 19-May-2022 3:58 PM
  • Journalist: Jung Hoon

Tokyo: According to our sources, the Japanese Steel manufacturers have been increasingly aiming to shift overseas production activities to their domestic market since last week. The decision is spurred by the fast-declining yen, global supply-chain restrictions, geopolitical threats, and the shifting wage patterns. He added that manufacturers from auto components to cosmetics and electronics are relocating their production units to Japan, with the trend projected to rise by the end of the year. Additionally, Japanese firms are shifting their production activities out of China, Southeast Asia, and Russia. The companies have received more than 25 orders linked to such switches due to their decision to develop new plants in their native nation.

As per industry experts, the yen has fallen so far that Japan's trade balance will not be in the red again; in such circumstances, Japanese market participants believe it is better to manufacture in Japan. Steel orders for construction have increased nearly 10.5% this year as compared to last year. Even before the yen's recent depreciation, the Japanese authorities have endorsed domestic enterprises to return their manufacturing bases to Japan. Also, the Ministry of Economy, Trade, and Industry is providing funds to businesses to help them invest in new start-ups that produce critical products and materials, reducing the risks of supply-chain bottlenecks. The government also approved funds for domestic semiconductor investment of roughly $6 billion in November.

Along with the currency depreciation, it's no surprise that more businesses are focusing on increasing their local manufacturing units. The sinking yen raised export margins, providing a strategic opportunity to transport goods from Japan. In addition, rising labour costs in other countries are also an issue. Over the last 30 years, wages in Japan have barely moved, whereas wages have roughly tripled in Southeast Asia.

As per ChemAnalyst,"This trend is a bright spot in Japan's Steel manufacturing market. The country's overall demand for Steel for construction was sluggish, and recent price surges in Steel "will be a setback, making it slightly challenging for the lower yen value, which is likely to be a key driver for Japanese manufacturing in the near term. Companies relocating to Japan must also contend with higher electricity prices and a labour shortage compelled by the country's decreasing and aging population. Thus, they'll have to be creative to produce items with less labour and create value-added products."

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