Cautious Japanese Manufacturers Holding Back The Abe’s Revival Plan
The plan for the economic revival of Japan, pushed by the Prime Minister Shinzo Abe needs Japanese companies to start investing more into production. The monetary easing measures of Bank of Japan encourage the spending of capital, in an effort to pull Japan out of stagnation and deflation that has been the trend for decades. The market has still not recovered from the 2007 crisis.
But the cautious Japanese business owners are not eager to spend, still remaining reserved and in no mood to risk. Further investment and capital spending is paramount for the planed revival, and low interest rates could encourage the investors. The officials of companies like Hirotoshi Ogura, of Daikin Industries, who promotes the idea of boosting the production without any additional spending, aren’t likely to be pushed into spending just by the monetary easing plan.
With the weakening Japanese Yen, numerous Japanese companies are moving production back in Japan, with the likes of Canon, Sharp, Panasonic, and Daikin repatriating the manufacturing process. No doubt this will boost the export figures, but the leading companies are unwilling to significantly raise the investments. The survey conducted by the Bank of Japan in the first three months in 2015 indicates not only that there is no room for optimism, but that small manufacturers in Japan actually plan to drop the capital spending in 2015 by 14%.
The large portion of the Japanese companies are still basing their business abroad, where economies are growing at a faster pace. Itochu Economic Research Institute’s chief economist Atsushi Takeda doesn’t see what else the Japanese government and the Prime Minister Abe could do, in order to encourage companies to risk. Perhaps the only plausible way out is making optimal conditions for alternative industries, which could spring progress and investments in less popular sectors of industry.