Japanese Prime Minister Shinzo Abe got an early sign of how his blueprint to revive Japan’s industrial vim and economic vigour was working when two of his country’s biggest car makers unveiled US$900 million worth of investments to boost production.
There was one drawback: the new assembly plants and expanded factories announced by Mazda Motor and Honda Motor are not in Japan but more than 3,000 kilometres away, in Thailand.
Since taking office last December, Abe’s stimulus efforts have barely dented a slide in private-sector investment at home, but they have done wonders for accelerating Japanese investment elsewhere in Asia.
Capital expenditures in Japan fell 4 per cent in the first six months this year, compared with the same period last year. Japanese investment in Asia, meanwhile, rose 22 per cent, according to the Japan External Trade Organisation (Jetro).
“Manufacturing investment is still contracting, because companies are investing abroad,” said Izumi Devalier, Japan economist at HSBC in Hong Kong.
Government spending and a weaker yen can’t conceal that Japan’s manufacturers are still forsaking their country’s shrinking population, high costs and regulatory barriers in favour of faster-growing, younger economies in Asia.
The prospect of a weakening yen – the currency has fallen roughly 20 per cent against the US dollar since December – sapping their purchasing power is only encouraging them to speed up investments overseas.
