‘Made-in-Japan’ spurs firms to ramp up domestic production

TOKYO (The Japan News/ANN) - Production in Japan costs more due to employee wages but companies anticipate that profits from goods made in Japan can offset these expenses. 

Japanese companies have been building new domestic factories as they attempt to cash in on the growing reputation for the quality of made-in-Japan products among visitors to the nation. Although production in Japan costs more due to employee wages that eclipse those paid in developing nations, these companies anticipate that profits from goods made in Japan can offset these expenses.

Speaking to reporters Wednesday, Shiseido Co. President Masahiko Uotani proudly described the cosmetics maker’s first new domestic factory to open in 36 years as one that would provide “safe and excellent-quality Japanese products” for customers. The plant in Otawara, Tochigi Prefecture, will begin full-scale operation by the end of this year and make Elixir and other skin care products, some of which will be exported to nations including China. The plant incorporates cutting-edge technologies, including the internet of things, for quality control.

 Shiseido will spend a total of ¥170 billion on the construction of this plant and two others in Osaka and Fukuoka prefectures that will bring the company’s number of domestic factories to six, and upgrade existing plants. Although Shiseido has opened factories in seven overseas locations including China, the United States and France since 2006, it has also closed domestic plants such as those in Kanagawa and Kyoto prefectures. Shiseido has made clear that domestic production is making a comeback.

 Fellow cosmetics maker Kose Corp. also is following this trend. Kose sold a production subsidiary in China in 2018 and in fiscal 2021 is scheduled to start making cosmetics at a new domestic plant for the first time in 42 years. This spring, Unicharm Corp. has started operating a plant in Fukuoka Prefecture, its first new domestic factory in Japan in 26 years. This plant manufactures disposable baby diapers and other products mainly for the Chinese market.

Trusted quality

 An employee in charge of a Kose high-end brand of cosmetics sold at the Ginza Six commercial complex in Tokyo’s Ginza district serves many foreign visitors who are particular about buying Japanese products. “I often get asked, ‘Is this made in Japan?’” she said.

 On Wednesday, a woman in her 30s from Nanjing, China, visited the store and bought about ¥15,000 worth of cosmetics, including lotion. “It feels nice on my skin, and I trust the company’s products,” the woman said.

 Many such shoppers buy products during trips to Japan and later order more online after returning to their home country, in what is known as “consumption after returning home.” According to the Economy, Trade and Industry Ministry, the market for Japanese goods exported to China through e-commerce in 2018 was worth ¥1.5 trillion, and this figure is expected to grow by at least 10% every year.

 “Demand is strong for Japanese goods that people apply on their skin or ingest,” said Tomonari Hamano, president of Trend Express Inc., a Tokyo-based consulting firm that supports Japanese companies entering the Chinese market.

Streamlined manufacturing

 According to a fiscal 2019 survey on the domestic manufacturing industry released Wednesday by the Japan Bank for International Cooperation, 42.8% of Japanese companies with production bases overseas said they will strengthen or expand their domestic business operations. This figure was up from 27.6% in the survey conducted five years ago.

 The fact that the wage gap between Japan and developing economies that have achieved sizzling growth has shrunk also is a huge factor in this shift back to domestic production. Although wages also are rising in Japan, investment in more efficient systems at factories has enabled companies to keep a cap on overall production costs.

 “Automation is playing an ever-increasing role at domestic production factories, and the number of labor-intensive plants is decreasing,” said Tomohisa Ishikawa, an advanced senior economist at the Japan Research Institute, Ltd. “Overall labor costs have become relatively lower.”

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