Japanese companies with operations overseas are making a U-turn to Japan in droves. This is largely because the companies, which moved their manufacturing bases out of Japan in pursuit of cost saving and localization, are now attracted to the Japanese government's offer of incentives such as less regulation and tax benefits.
According to a report published by the Japanese Ministry of Economy, Trade, and Industry on May 17 based on a survey on companies with overseas operations, 98 companies out of 834 (11.8%) that answered they have an overseas plant have already moved their production plant to Japan last year. Of the 98 firms, 66.2 percent moved their production bases back to Japan from China and Hong Kong. Other countries from which Japanese companies returned include Thailand (8.5%), Vietnam (4.3%), and Indonesia (4.3%).
The U-turn of Japanese firms has accelerated since Prime Minister Shinzo Abe took power in 2012. Since then, companies like Canon, Casio, Panasonic, and Sharp have moved their operations back home. The share of overseas investment for the Japanese manufacturing sector has fallen to a low of 43.8 percent last year from 59.3 percent in 2013.
The Abe government has been quick to offer a variety of incentives to Japanese firms to change their mind, including measures to keep the yen weak and corporate tax cuts. Japan's average corporate tax rate has declined to 32.11 percent from about 36 percent in 2013.
The Korean government has also taken measures to entice companies to move back home since 2013. Even though the number of firms that showed a willingness to make a U-turn reached 80, the actual number fell short of only 43.