NewJapan recovery in slow lane as firms refuse to splurge

Hirotoshi Ogura, a self-described "factory geek", is Daikin Industries' master of doing more with less - and part of the reason Japan's recovery remains stuck in the slow lane.

As Japan heads into the season of peak demand for room air-conditioners, Ogura and other Daikin managers have been tasked with figuring out how to boost output by about 20 per cent at a plant in western Japan that six years ago the company had almost given up on as unprofitable.

The wrinkle: they have no budget for new capital investment at the 45-year-old Kusatsu plant. The still-evolving workaround involves home-made robots for ferrying parts, experimental systems using gravity rather than electricity to power parts of the line, more temporary workers on seasonal contracts and dozens of steps to chip away at the 1.63 hours it takes to make a typical air-conditioner.

"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."

Like Daikin, a number of Japanese manufacturers are shifting production back to Japan from China and elsewhere to take advantage of a weaker yen. Rivals Panasonic Corp has pulled back some production of room air-conditioners and Sharp has brought back production of some refrigerators.

But even as output recovers, Japanese companies remain cautious about new capital investment in factories and equipment.

After increasing capital spending by 6 per cent in the past financial year, small manufacturers plan a 14 per cent decrease this year, according to the Bank of Japan's quarterly survey released last week. Big manufacturers like Daikin plan a 5 per cent increase, but overall investment remains 10 per cent below pre-crisis levels in 2007.