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‘Pack up and get out of there,’ Japan to spend $2.2 billion to get Japanese companies to exit China

The first of the many avalanches has begun for China. The Shinzo Abe government of Japan has approved a  stimulus package worth whopping 108.2 trillion yen (US$993 billion) – equal to 20 percent of Japan’s economic output – to cushion the impact of the epidemic on the world’s third-largest economy. Out of the total amount, it has earmarked US $2.2 billion to help its manufacturers shift production out of China.

220 billion yen ($2 billion) is pledged for Japanese companies shifting production back to Japan and the remaining 23.5 billion yen for those seeking to move production to other countries. The disruption in supply chains amidst the growing scare of the Wuhan virus and the damages incurred when the Coronavirus epidemic was at its peak in China has led Japan to take this radical step. China will lose a large number of jobs as a result of this move.

China is Japan’s biggest trading partner under normal circumstances, but imports from China slumped by almost half in February as the disease closed factories, in turn starving Japanese manufacturers of necessary components. To be precise, China exports $148 billion worth of goods to Japan and despite having such big numbers stacked against it, the Japanese are not taking the foot off the pedal and attacking China much like the rest of the world.

Japan’s fury towards China is understandable because of the postponement of the Tokyo Olympics. The country was keen on ensuring that the quadrennial multi-sports event goes on as planned but China and its irresponsible handling of the deadly virus caused a full-blown pandemic which in turn crippled the entire planet.

The Japanese Deputy PM Taro Aso has even gone on to say that the World Health Organisation might have to change its name to “Chinese Health Organisation”, during a speech in Japanese Parliament wherein he lent support to a petition terming Tedros Adhanom Ghebreyesus unfit for the role of the WHO chief.

Historically, Japan does not share a pleasant relationship with Beijing. The territorial disputes and World War II embittered grievances have marred the Japan-China relationship for decades. The relations between the two nations are so sour that it can be gauged from the fact that a restaurant owner in China put up a banner that read “Congratulations to the United States for the outbreak of Coronavirus and wish the pandemic lasts forever in Japan”. 

While in the recent past, the shadow of US-Japan ties has defined how Japan approaches China, Shinzo Abe already found himself in a spot of bother as far as his attempts to rebuild ties with China are concerned. With the Trump administration entering into a trade war with Beijing, Abe found it hard to continue with his balancing act.

Although Xi Jinping and Shinzo Abe were scheduled to meet this month when the former was to visit Japan for a state visit, which would have a first of its sort in a decade. But since the visit had to be canceled courtesy the virus, it looks like things are only going downhill from here if Japan’s pulling the plug is any indication.

While Japan has put the foot down and ordered its companies to pack their bags from China and hunt for new places to set their camp. India and many South-east nations like Vietnam and Bangladesh are eyeing this lucrative opportunity to lure Japan to their shores. India looks like the best bet for Japan given the cheap labour and a robust manufacturing ecosystem of which Japan already is a part.

Both the countries have had close civilizational ties for 1,400 years. There are 1,441 Japanese companies registered in India, up from 1,369 in 2017. These companies have 5,102 business establishments spread across states like Karnataka, Tamil Nadu, West Bengal, and Gujarat. The southern Indian state of Karnataka alone has around 530 Japanese companies working in it, up from around 200 five years ago.

Also, Japan has been a strong admirer and supporter of Prime Minister Narendra Modi’s Make in India, Skill India, and Clean India Mission initiatives. Therefore it makes sense for

Japan to drop the anchor here in India.

Japan has given a rap on the knuckle to China and its high time the other countries follow the suit and make China pay for what it has done.


9 April 2020

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