Japan Earmarks Billions For Firms to Leave China As Outbreak Exposes Supply Chain Risks

A student works on a portable spot welding machine at the Japan-India Institute for Manufacturing (JIM) at Ganpat University in Kherva, India, on Nov. 26, 2018. Sam Panthaky/AFP/Getty Images

Japan has budgeted $2.2 billion to encourage its manufacturing firms to leave China as pandemic-driven shortages highlight supply chain risks.

The funds to get companies to move away from China come from Japan’s massive COVID-19 emergency relief package, Bloomberg reported. Some $2 billion has been allocated for firms repatriating to Japan, while the remainder is to go to companies shifting production away from the Chinese mainland to other countries.

It comes after the outbreak of the CCP (Chinese Communist Party) virus, commonly known as novel coronavirus, in Wuhan led to mass factory shutdowns, depriving Japanese manufacturers of desperately-needed components imported from China. This led to renewed calls to de-risk supply chains and prompted the Japanese government to consider policies around repatriation and diversification of manufacturing lines to minimize future disruption.

A man crosses a road in the Shinjuku district in Tokyo, Japan, on April 8, 2020. Tomohiro Ohsumi/Getty Images

Reacting to the move, China’s Foreign Ministry spokesman Zhao Lijian was cited by Bloomberg as saying that he hoped Japan would “take proper measures to ensure the world economy will be impacted as little as possible and to ensure that supply chains are impacted as little as possible.”

Many in Japan, and elsewhere, have blamed China for mishandling the early stages of the pandemic, contributing to the global spread of COVID-19, the disease caused by the CCP virus.

Iran’s health officials recently called China’s official virus toll a “bitter joke,” saying the true figures are likely higher.

Commuters, many wearing protective masks, walk through Shinagawa train station in Tokyo, Japan, on April 8, 2020. Carl Court/Getty Images

Japanese officials, too, have faced criticism over their COVID-19 response.

A former Japanese health chief on Thursday told local newspaper Mainichi Shimbun that the number of COVID-19 cases in the country could be 10 times higher than official estimates, according to United Press International.

Yoichi Masuzoe, a former health minister and ex-governor of Tokyo, blamed the administration of Prime Minister Shinzo Abe for being slow to act in response to the outbreak and for failing to heed calls for increased testing.

Japan's Prime Minister Shinzo Abe removes his protective mask during a press conference in Tokyo, Japan, on April 7, 2020. Tomohiro Ohsumi/Getty Images

In a sudden spike in new COVID-19 infections, Japan reported 384 new cases of the disease on Thursday, while the total number of those infected hit more than 5,300, NHK public broadcaster said.

With 181 cases, Tokyo saw its biggest single-day jump in new COVID-19 infections.

Japanese authorities imposed a state of emergency this week in Tokyo and six other areas. The move gives local officials stronger legal authority to urge people to stay home and businesses to close. In contrast to lockdowns in some countries enforced by fines and arrests for non-compliance, Japan is relying more on peer pressure and a tradition of respect for authority.

The central bank warned that the CCP virus pandemic had created an “extremely high” level of uncertainty for the world’s third-largest economy, with regional economies facing their worst conditions since the global financial crisis a decade ago.

A person wearing a protective mask takes a rest among empty seats in a restaurant at the Roppongi Hills complex in Tokyo, Japan, on April 1, 2020. Issei Kato/Reuters

In response to the economic fallout from the pandemic, the Bank of Japan eased monetary policy by ramping up purchases of exchange-traded funds and other risky assets, including corporate bonds. It is also launching a new loan program to extend one-year, zero-rate loans to banks and other financial institutions.

Japan’s government also approved on Tuesday an unprecedented economic stimulus package equal to 20 percent of economic output. The package totals $993 billion and includes cash payouts to households and small and midsize firms.