Product manufacturers in Japan cautious about economy in disregard of Abes assurances.Tim Kennedy (Author) Published Date : Apr 05, 2015 06:32 ET
Considering the fact that several companies like Panasonic, Sharp, Canon, and others are moving back production from China to Japan to benefit from the weaker yen, several of these companies among others are re-strategizing and trying to reposition their businesses for more economic gains and would not accent yet to Abe s urge to splurge.
According to Atsushi Takeda, chief economist for the Itochu Economic Research Institute, Companies were so hard hit by the excessive yen strength after the Lehman shock they want to be convinced there won't be a reversal of the weak yen over the next five to 10 years, he said. They are in no mood to take risk.
For instance, Hirotoshi Ogura is Daikin Industries factory geek in the sense that he spearheads the company s effort to do more with less in order to beat the weakening economy and maximize profits. With Japan going into the season for buying air-conditioners, Daikin managers and Ogura have the mandate of boosting output by 20% from the 45-year-old Kusatsu plant in western Japan which the company some six years ago gave up as unprofitable.
Although no major capital investment is really to be made into this plant, it has tens of home-made robots that are used to carry parts, experimental systems that use gravity instead of electricity, seasonal workers, and several other necessities the company appears set to make new air conditioners at the plant.
We can do a lot without spending anything, says Ogura, a 33-year Daikin veteran who joined the company just after high school. Anything we need, we first try to build ourselves.
Output is rising, but Japanese companies are still wary about investing new capital into factories and equipment, although smaller firms show this trend much more than heavier and established ones.
According to the Bank of Japan s quarterly survey made available this week, the country is increasing capital spending by 6% in the recent fiscal year but small manufacturers are looking forward to reducing their capital expenses by as much as 145; and while Daikin among other big manufacturers plan for a 5% increase, overall investment still remains at 10% below what obtained before the 2007 economic crisis.
Economists say Prime Minister Shinzo Abe's economic revival plan would only help to bring Japan out of decades of deflation and stagnation if companies would invest heavily in the economy.
It turned out that the government and the BOJ were wrong in thinking monetary easing would boost capital spending, said Taro Saito, director of economic research at NLI Research Institute. Low growth expectations appear to outweigh the benefit from lower interest rates, keeping companies from boosting capital spending.
Product manufacturers in Japan cautious about economy in disregard of Abes assurances.