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Japan-based firms' investments in their home market in 2022 were more robust than in years past and three main factors were the driver for their relocation back to Japan.
Abstract
Three factors were the Japanese firms' rethinking of their supply chain strategies amid the US-China trade war and the COVID-19 pandemic; Japan's economic-security policy attracting investments from foreign large corporations and spurring demand for components and materials; and the ongoing depreciation of the Japanese yen that helps in reducing the costs for the Japanese firms during their initial investments.
Nevertheless, labor shortage due to the low birth rate and the possible rebounding yen may still put pressure on Japanese companies in the long term.
The US-China trade war on top of COVID-19 prompts Japanese firms to re-examine their strategies, looking to build a supply chain with higher resilience. By diversifying their production bases, they can also become more flexible in coping with tariff regulations amid the tension between the superpowers and component supply challenges arising from pandemic-induced lockdowns and port congestions. Those keenest on making such changes are mostly electronics component and automotive component suppliers.
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