Ministry of Economy, Trade and Industry Ministry of Health, Labour and Welfare Ministry of Education, Culture, Sports, Science and Technology
Part 1 Current State of Manufacturing Infrastructure Technology and Related Issues Chapter 1: Status of Manufacturing Industries in Japan under the Worldwide Recession［p. 3］ Section 1 Status of manufacturing industries in Japan under the worldwide recession Section 2 Current state of employment/labor of manufacturing workers Chapter 2: Challenges and Prospects Facing Japan’s Monodzukuri Industries［p. 12］ －Strategic Move for the Growth of Japan’s Monodzukuri Industries－ Section 1 Japan’s monodzukuri industries turn expanding limitations on resources and environmental constraints into a strength and continue to grow Section 2 Japan’s monodzukuri industries strive to enhance the level of manufacturing (monodzukuri) capability Section 3 Restructuring of global supply chains and merchandise strategy under worldwide recession Section 4 Strategic moves for the growth of manufacturing industries/approaches to and challenges for the development of prospective areas Chapter 3: Strengthening the Manufacturing Base by Developing Human Resources as the Core for Monodzukuri ［p. 39］ Section 1 Securing and training of core human resources in manufacturing industries Section 2 Skill development measures related to “monodzukuri” Chapter 4: Research and Development and Promotion of Study to Support the Basis of Monodzukuri ［p. 50］ Section 1 Situation of R&D and promotion of study to support the basis of monodzukuri Section 2 Promotion of regional R&D for strengthening of industrial capabilities Section 3 Promotion of R&D to enhance industrial capabilities Section 4 Development of monodzukuri human resources through school educational programsPart 2 Measures and Policies Implemented in Fiscal 2008 Relating to the Promotion of Manufacturing Infrastructure Technology ［p. 64］ 2 Part 1 Current State of Manufacturing Infrastructure Technology and Related Issues Chapter 1: Status of Manufacturing Industries in Japan under the Worldwide Recession Section 1 Status of manufacturing industries in Japan under the worldwide recession The Japanese economy has been showing negative growth as a result of a sharp drop in exports caused by a slump in overseas demand. With consumer sentiment depressed, a slump in personal consumption may prolong the weakness of the Japanese economy.
[Chart 1-1 Contribution of Domestic and [Chart 1-2 Changes in the Consumer （％） 2.0 Overseas Demand] Confidence Index] 50 1.5
1.0 0.5 45 0.0
-0.5 40 -1.0 -1.5 -2.0 Contribution of domestic demand 35 Contribution of foreign demand -2.5 GDP growth rate -3.0 30 -3.5 ⅠⅡⅢⅣⅠⅡⅢⅣⅠⅡⅢⅣⅠⅡⅢⅣⅠⅡⅢⅣⅠⅡⅢⅣⅠⅡⅢⅣⅠⅡⅢⅣⅠⅡⅢⅣⅠⅡⅢⅣ(Quarter)
99 00 01 02 03 04 05 06 07 08 (Year) 25 (Quarter) GDP growth rate -0.1 2.9 0.2 0.3 1.4 2.7 1.9 2.0 2.4 -0.6（％） ⅠⅡⅢⅣⅠⅡⅢⅣⅠⅡⅢⅣⅠⅡⅢⅣⅠⅡⅢⅣⅠⅡⅢⅣⅠⅡⅢⅣⅠⅡⅢⅣⅠⅡⅢⅣⅠⅡⅢⅣⅠ Contribution of -0.0 2.4 1.0 -0.4 0.8 1.9 1.7 1.2 11.33 -0.8（％） domestic demand 99 00 01 02 03 04 05 06 07 08 09 (Year) Contribution of -0.1 0.5 -0.8 0.7 0.7 0.8 0.3 0.8 1.1 0.1（％） foreign demand Remarks: Quarterly data (ordinary households, Source: Cabinet Office “National Accounts,” seasonally adjusted figures) Source: Cabinet Office “Consumer Confidence Survey” (Comparison with prior recessions (1) Speed of the downturn) In the current recession (which began in October 2007), both the level of production and the value of exports in the manufacturing industry initially showed a similar downtrend to those seen in the prior recessions. However, since October 2008, the decline in production and exports has accelerated rapidly due to a steep drop in overseas demand and the yen’s appreciation. [Chart 1-3 Changes in Indices of Industrial [Chart 1-4 Changes in the Export Value Production (Manufacturing Industries) Index (Manufacturing Industries) Comparison with Prior Recessions] Comparison with Prior Recessions] 105 115 August 2008 100 September 2008 105 95
90 95
85 85 80 February 1991- 75 75 May 1997 - February 1991 - 70 November 2000 - Horizontal axis represents 65 May 1997 - October 2007 - the number of months passed November 2000 - Horizontal axis represents 65 since the business peak 55 the number of months October 2007 - 60 passed since the business 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 45 (Number of months later) 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 (Number of months later) Remarks: The production levels have been indexed with Remarks: The export values have been indexed with the the level at the peak of each economic cycle as 100. value at the peak of each economic cycle as 100. Source: METI “Indices of Industrial Production” 3 Source: Ministry of Finance “Trade Statistics” (Comparison with prior recessions (ii) Extent of the impact)
The impact of the economic downturn has varied from industry to industry in the prior recessions, whereas the impact has been felt similarly by a wide range of industries in the current recession because of a steep decline in overseas demand and a slump in domestic demand. [Chart 1-5 Changes in Indices of Industrial Production by Industry; Comparison with Prior Recessions] (Trends after the peak of each economic cycle) [After February 1991] [After November 2000] [After October 2007] There was a moderate impact on a The transportation equipment and There was a significant impact on a 120 wide range of industries. 110 chemical industries held firm. 130 wide range of industries.
110 105 120 September 2008 Steel 100 100 110 95 100 Chemicals 90 90 90 General 80 machinery 85 80 Electric 70 machines 80 70 Transport 60 75 60 machinery
50 70 50 0 5 10 15 20 25 30 35 0 5 10 15 20 25 30 35 0 5 10 15 20 25 30 35 (Number of months later) (Number of months later) (Number of months later) Remarks: In all of the above charts, the production levels have been indexed with the level of 2005 as 100. The horizontal axis indicates the number of months past the peak of the economic cycle. The key in the right-hand chart is also applicable to the other two charts. Source: METI “Indices of Industrial Production” Year-on-year changes in the volume of automobile exports indicate that in prior recessions, the Japanese auto industry maintained and expanded export volumes through a shift in export destination regions. However, exports to almost all regions have declined since December 2008, suggesting that the current recession has caused a widespread reduction in demand compared with prior recessions. [Chart 1-6 Changes in Contribution to Auto [Chart 1-7 Changes in the Contribution to Exports by Export Destination Region Auto Exports by Export Destination Region (Annual Figures)] (Monthly Figures)] Contribution (%) 10,000 vehicles 30 700 Contribution (%) 10,000 vehicles The total number of exported vehicles 40 The total number of exported 70 for all regions vehicles for all regions 25 600 20 60 20 50 0 15 500 40 10 - 20 400 30 5 - 40 300 20 0 949596979899000102030405060708 - 60 10 - 5 0 7 4 1 0 7 4 1 0 (Year)7 2004 1 1 0 0 0 1 0 0 0 1 0 0 0 / / / / / / / / / / / / 6 8 8 8 8 7 7 7 7 6 6 6 - 80 0 0 - 10 0 0 0 0 0 0 0 0 0 0 0 100 - 15 (Year/month)
- 20 0 Asia Middle East Europe Asia Middle East Europe North America Others North America Central America South America Africa Oceania Others Source: Statistics compiled by the Japan Automobile Source: Statistics compiled by the Japan Automobile Manufacturers Association,Inc. 4 Manufacturers Association,Inc. (Comparison with prior recessions (iii) Response by companies) Comparison with production, shipments, and inventories of automobiles in prior recessions shows that the speed of production adjustments in the current recession is different from that seen in the recession that followed the collapse of the bubble economy (after February 1991), as Japanese automakers have been curbing a rise in inventories by quickly implementing production adjustments in response to a steep drop in demand. [Chart 1-8 Changes in Production, Shipments, and Inventories of Automobiles; Comparison with Prior Recessions] (Trends after the peak of the economic cycle) [After February 1991] [After October 2007] (Production and shipments: (Production and shipments: (Inventory index) (Inventory index) 10,000 vehicles) 10,000 vehicles) 140 160 140 160 150 120 150 120 100 140 100 140 Rapid production 130 80 adjustments occurred. 80 130 120 60 110 60 120 40 Rapid production 100 40 Production adjustments and the state of excess 110 20 adjustments curbed a rise 90 inventories were prolonged. in inventories. 20 100 0 80 0 5 10 15 20 25 30 35 0 5 10 15 20 25 30 35 (Number of months later) (Number of months later) Shipment sales volume Production volume Shipment sales volume Production volume Inventory index Inventory index Remarks: Inventory levels have been indexed with the level of 2005 as 100. The horizontal axis indicates the number of months past the peak of the economic cycle. Source: METI “Current Production Statistics Survey” and METI “Indices of Industrial Production” (Impact of fluctuations in foreign exchange rates) The trend in the exchange rates between the yen and other currencies including the U.S. dollar, the euro, and the South Korean won since 2000 shows that the yen has rapidly appreciated against the won in particular since September 2008. The won’s rapid depreciation was triggered by the withdrawal of funds from the South Korean financial market by foreign investors and continued against the background of South Korean companies’ moves to have dollar funds on hand as a result of the deterioration of the real economy. Such volatility in the exchange rates, which we have not experienced in the prior recessions, has significantly affected the export and import environment for Japan’s manufacturing industries. [Chart 1-9 Changes in the Yen’s Exchange [Chart 1-10 Trend in the Yen’s Exchange Rates Rates Against the U.S. Dollar, the Euro, and Against the U.S. Dollar, the Euro, and the the South Korean Won (Monthly Basis)] 220 South Korean Won (Weekly Basis)]
150 The yen’s 200 Dollar Dollar Euro Euro appreciation The yen’s Won 180 Won appreciation 120 160
140 90 120
60 100 80
30 60 00 01 02 03 04 05 06 07 08 09 123 456 78 910111212345 678 91011121 234 (Year) 07 08 09 Remarks: The exchanges rate has been indexed Remarks: The exchanges rate has been indexed with the with the monthly average rate of each currency per weekly average rate of each currency per yen in the first week yen in January 2000 as 100. 5 of January 2007 as 100. Source: Economic statistics compiled by Bloomberg Source: Economic statistics compiled by Bloomberg (Reason for Japan suffering larger effects from the recession than the United States, where the worldwide recession originated) In terms of real GDP (on an annualized basis), the Japanese economy contracted 12.1% in the October-December quarter, a worse performance than the 6.3% contraction posted by the U.S. economy, where the worldwide recession originated. This is probably attributable to differences in the industrial structure between Japan and the United States, such as Japan’s heavy dependence on the auto and electronics industries, which have slumped particularly sharply, and the high ratio of exports to the total demand by these industries in Japan. In addition, the impact of the recession has been amplified by a sharp slump in consumer sentiment as well as by the widespread effects on upstream industries of the rapid production and inventory adjustments implemented in response to the recession. Differences in the industrial structure ■ Heavy dependence on specific industries ・Japan depends heavily on the electric machinery, transportation machinery, and general machinery industries. (These three industries account for about 50% of Japan’s industrial production, compared with a ratio of 20% for the United States.) ■ Heavy dependence on products susceptible to economic cycles, such as luxury consumer goods and production equipment ・Purchases of luxury consumer goods such as automobiles, which are Japan’s major export item, decrease during an economic downturn, and production equipment such as industrial machinery and prime movers are liable to be significantly affected by cuts and postponements of capital investment. ■ High ratio of domestically procured parts, materials and production equipment ・As the ratio of domestically procured parts and materials is high in Japan, fluctuations in the production of final goods have a widespread effect on Japanese industry.
[Chart 1-11 Proportion of Three Categories of [Chart 1-12 Domestic Procurement Ratio (2007)] Business in Total Industrial Production] (%) 94.5 (%) 100 92.4 50 48.4 80.3 80 66.6 40 13.2 59.3 57.9 60 30 16.8 20.8 40 20 4.6 7.7 10 18.4 20 8.5 0 0 Japan U.S. Electric Transport General Electric machines Transport machinery machines machinery machinery General machinery Japan U.S. Remarks: “Electrical machinery, etc.” includes information and communications Remarks: Domestic procurement ratio = 1-(the ratio of imports to equipment as well as electronics parts and devices. the total supply (output value + import value)) Source: METI “Indices of Industrial Production” (2005 weightings) Source: Cabinet Office “National Accounts” and U.S. Department FRB “Industrial Production and Capacity Utilization) (2007 weightings) of Commerce “Input-Output Table”
High ratio of exports Other factors ■ Ratio of exports to total demand ■ Rapid production and inventory adjustments ・The ratio of exports to total demand in the three major ■ A slump in consumer sentiment due to job industries is higher in Japan than in the United States. The reductions and salary cuts ratio of exports in Japan is on an uptrend against the ■ ’ background of growing demand from emerging countries and The yen s appreciation that came in tandem with resource-rich countries as well as the yen’s depreciation. the above [Chart 1-13 Rate of Export in Total Demand [Chart 1-14 Changes in the Indices of (%) (2007)] (%) Industrial Production] 35 28.7 30.4 5 30 25.9 23.5 25 18.7 0 20 12.8
15 0 0 0 0 0 0 0 0 0 0 8 8 7 7 6 6 5 5 4 4 10 Ⅲ Ⅰ Ⅲ Ⅰ Ⅲ Ⅰ Ⅲ Ⅰ -5Ⅲ Ⅰ 5 Rapid production adjustments 0 -10 Electric Transport General machines machinery machinery -15 Japan U.S. Japan U.S. Remarks: Total demand = intermediate consumption + domestic demand + exports Source: METI “Indices of Industrial Production” Source: Cabinet Office “National Accounts” and U.S. Department of Commerce FRB “Industrial Production and Capacity Utilization” “Input-Output Table” 6 (Deterioration of the cash position and implementation of support measures)
The diffusion index of the cash position has rapidly deteriorated since 2008, with small and medium enterprises experiencing substantial negative figures. In consideration of these severe business conditions, the Japanese government has been adopting a variety of supportive measures to improve the cash position.
[Chart 1-15 Changes in the D.I. [Column: Implementation of Supportive Measures to Improve the Cash Position] of Cash Position] METI implemented a variety of supportive measures to improve the cash position in light of the difficult business conditions for Japanese companies. Specifically, in addition to (%) providing emergency guarantees, METI reduced the interest rate on loans provided by 30 Japan Finance Corporation by 0.3 percentage points and made a safety net loan programs available at Shoko Chukin Bank. METI also implemented anti-crisis response measures, Good cash position including the provision of loans totaling approximately ¥3 trillion to middle-ranking and 20 large companies. Furthermore, METI strove to stabilize business management and maintain employment by implementing comprehensive measures applicable irrespective of the size of companies, 10 such as expanding corporate financing for Japanese companies operating abroad by starting a scheme to support fund-raising in developed countries through Japan Bank for International Cooperation (JBIC), in addition to implementing support measures related to trade insurance. 0
1. Supportive measures to improve the cash position for small and medium enterprises (SMEs) ○Safety net guarantee program: The number of designated business types increased to 760. - 10 All industries ○Safety net loan program: The maximum loan amount and the scope of allowable Manufacturing industries purposes of fund use were expanded and the loan maturity period was extended.
- 20 Large enterprises 2. Supportive measures to improve the cash position for middle-ranking and large enterprises Cash strapped position (manufacturing industries) Small and medium enterprises ○Anti-crisis response measures: Development Bank of Japan and Shoko Chukin Bank (manufacturing industries) provide low-interest loans to middle-ranking and large enterprises. Japan Finance - 30 Corporation purchases commercial papers issued by companies. ⅠⅡⅢⅣⅠⅡⅢⅣⅠⅡⅢⅣⅠⅡⅢⅣⅠⅡⅢⅣⅠⅡⅢⅣⅠⅡⅢⅣⅠⅡⅢⅣⅠⅡⅢⅣⅠ（Quarter) ○ Provision of financing support for companies recognized as eligible for support under the Industrial Revitalization Act (Year 00 01 02 03 04 05 06 07 08 09 ） 3. Supportive measures to improve the cash position for Japanese companies operating abroad
○ Expansion of financing support by JBIC for overseas subsidiaries of Japanese companies Source: Bank of Japan “Tankan Short-term Economic ○ Expansion of financing support by NEXI (Nippon Export and Investment Insurance) for Survey of Enterprises in Japan” overseas subsidiaries of Japanese companies (Issues to be resolved in order to strengthen the business foundation of Japan’s manufacturing industries) In the face of the severe fundamental financial outlook, manufacturing companies started reviewing their capital investment by postponing and reducing the size of investment while focusing investment on areas which they expect to grow in the future. While it will be essential that they reduce costs and improve efficiency further in the short term to cope with the worldwide recession, it is desirable that in the medium to long term, they pursue the creation of added- value by concentrating investment on specific areas (the environment, new energy, etc.) [Chart 1-16 Year-on-Year Changes in Capital [Table 1-17 Intensive Investment in Specific (%) 50 Investment by the Manufacturing Industry] Areas (Solar Cells)] Production Company Name Descriptions of Investment 40 Start Year Production capacity increase (Katsuragi (thin film) 2008 from 15MW to 160MW) 30 New plant construction (Sakai; initial production Sharp 2010 volume at 460MW) 20 New plant construction (Italy; initial production volume at 460MW) Production capacity increase (Mexico; from 35MW to 2008 10 240MW) Panel New plant construction (Yasu; the largest plant for the Kyocera Makers Kyocera group) 0 2010 Production capacity increase (China; from 60MW to 240MW) New company establishment (future target of 2GW) a - 10 2009 joint venture with Nippon Oil Sanyo Electric Production capacity increase (Kaizuka, Shimane; from 2010 - 20 340MW to 600MW) Production capacity increase (Toyooka; from 70MW to Kaneka 2010 - 30 150MW) Production capacity increase (Mexico; from 20MW to 2008 50MW) - 40 Sanyo Electric New company establishment, new plant construction 2009 (U.S.; 70MW) New plant construction (Kamisu; polycrystalline - 50 ENF 2010 Parts and silicon; future target of 10,000 tons 05Ⅰ 05Ⅱ 05Ⅲ 05Ⅳ 06Ⅰ 06Ⅱ 06Ⅲ 06Ⅳ 07Ⅰ 07Ⅱ 07Ⅲ 07Ⅳ 08Ⅰ 08Ⅱ 08Ⅲ New plant construction (Malaysia; polycrystalline Materials Tokuyama 2012 silicon; 3,000 tons) All industries (excluding the financial and insurance industries) Facility upgrade (U.K., U.S.; glass for panels, 60,000 NSG 2009-2010 Manufacturing industry (all sizes) tons each) Facility upgrade (domestic and foreign plants; PET Manufacturing industry (from ￥10 million to ￥100 million) Toray 2010 Manufacturing industry (from ￥100 million to ￥1 billion) film for back sheets; from 12,000 tons to 24,000 tons Manufacturing industry ( 1 billion or higher) ￥ Remarks: The production volumes indicated in the above table Source: Ministry of Finance “Financial Statements Statistics are annual volumes. of Corporations by Industry” 7 Source: Survey by METI Section 2 Current state of employment/labor of manufacturing workers
・ The number of people employed in the manufacturing industry has been on a long- term downtrend. Although the number began to recover somewhat in the second quarter of 2005, it has been declining again since the latter half of 2007. ・ The unemployment rate increased from 3.6% in July 2007 to 4.8% in March 2009. ・ The number of new job offers has been on a downtrend, with offers in the manufacturing industry posting a particularly sharp drop. ・ The effective job offer rate in the areas of manufacturing processes and labor services has declined notably since late 2008.
[Chart 1-18 Changes in the Number of Workers [Chart 1-19 Changes in the Unemployment Employed, etc. in the Manufacturing Industry] Rate and the Number of the Unemployed]
(10,000 people) 1,350 (10,000 people) (%) People engaging in jobs 400 5 1,300 Number of unemployed people Employed workers (left axis) 1,250 Unemployment rate (right axis) 350 4.5 1,200
1,150 300 4 1,100,
1,050 250 3.5
1,000 ⅠⅡⅢⅣⅠⅡⅢⅣⅠⅡⅢⅣⅠⅡⅢⅣⅠⅡⅢⅣⅠⅡⅢⅣⅠⅡⅢⅣⅠⅡⅢⅣⅠ 200 3 2001 2002 2003 2004 2005 2006 2007 2008 2009 （Year) 07 08 09 (Year)
Remarks: I to IV represent the 1st quarter to the 4th Remarks: The above figures have been seasonally quarter. The above figures are raw numbers. adjusted. Source: MIC “Labour Force Survey” Source: MIC “Labour Force Survey”
[Chart 1-20: Changes in the Number of Job Offers in the Manufacturing Industry [Chart 1-21 Changes in the Effective Job Offer Rate] (October 2007 = 100)] (Times) All jobs 100 2.50
90 All industries Jobs related to production processes/labor 80 2.00 Manufacturing industry Jobs related metal welding and 70 cutting 60 1.50 Electrical machinery Jobs related to metal 50 manufacturing industry processing 1.00 40 M etal product Jobs related to the assembly manufacturing industry and repairs of transportation 30 equipment Electronic parts/devices 0.50 Jobs related to the assembly 20 manufacturing industry and repairs of general 10 machinery General machinery 0.00 Jobs related to the assembly manufacturing industry 0 and repairs of electrical October ’ January ’ April July October January ’ January ’08 January ’09 machinery 07 08 09 Remarks: The above figures represent offers for permanent jobs Remarks: The above figures represent offers for permanent jobs excluding offers for new graduates but including those for part- excluding offers for new graduates but including those for time jobs. The figures are raw numbers. part-time jobs. The figures are raw numbers. Source: MHLW “Statistics on Job Security” Source: MHLW “Statistics on Job Security” 8 ・ In terms of a feeling of labor excess or deficiency, the number of companies feeling an excess of labor began to exceed the number of companies feeling a deficiency of labor in the fourth quarter of 2008, and the feeling of an excess in supply has been expanding rapidly, especially in manufacturing industries. ・ The number of companies that adopted some form of employment adjustment increased sharply during the period between October and December 2008. The number of such companies in manufacturing industries reached half of all enterprises. ・ According to data collected by the Ministry of Health, Labour and Welfare, about 193,000 non-regular workers in manufacturing industries have left or will leave their jobs between October 2008 and June 2009 because of suspension of employment. ・ The number of people covered by the employment adjustment subsidy program has increased rapidly since around the end of 2008, standing at approximately 2.38 million people in March 2009.
[Chart 1-22 Changes in the D.I. of Employment [Chart 1-23 Changes in the Rate of Enterprises Conditions ] which Implemented Employment Adjustment] Percentage point (deficient value minus excessive value) (%) 60 20 Manufacturing industries All industries 50 Total of all industries surveyed Manufacturing industries 40 0 30
20 -20 10
0
-40 99 00 01 02 03 04 05 06 07 08 (FY) (Methods of employment adjustments implemented in the manufacturing industry in the October-December ⅠⅡⅢⅣⅠⅡⅢⅣⅠⅡⅢⅣⅠⅡⅢⅣⅠⅡⅢⅣⅠⅡⅢⅣⅠⅡⅢⅣⅠⅡⅢⅣⅠⅡⅢⅣⅠ quarter of 2008 [multiple replies allowed; Unit: %]
00 01 02 03 0４ 05 06 07 08 09 Methods of employment adjustments Employmen Suspension/ Reduction/ cancellation t Loan of Temporary Invitation (FY) Restrictions suspension contract Reallocatio Total Increase in renewal for workers to closure for early adjustments on overtime of mid- n of (implemented holidays temporary, other (temporary retirement/ work career workers or planned) seasonal, or companies layoff dismissal Source: Bank of Japan “Tankan Short-term Economic employment part-time workers Survey of Enterprises in Japan” 100 50 34 11 14 10 15 5 5 3 Source: MHLW “Survey on Labour Economy Trends” [Chart 1-24 Situation of Employment [Table 1-25 Situation of Receipt of Temporary Suspension of Non-Regular Workers in Layoff Plans Related to the Employment Manufacturing Industries] Adjustment Subsidy Program (Preliminary)] Others: 8,991 Independent cotractors 14,691 Number of Number of target business sites employees
Cotracted employees Fiscal 2007 638 12,940 (seasonal workers, etc.) April-November 2008 898 26,407 40,377 Temporary employees December 2008 1,783 138,549 128,732 January 2009 12,640 879,614 February 2009 30,621 1,865,792 Total for manufacturing industries = 192,791 March 2009 48,226 2,379,069 Remarks: 1. As voluntary hearings with enterprises are being held to the extent possible based on information Remarks: Data for December 2008 and later include the obtained by Prefectural Labour Bureaus and public number of temporary layoff plans received with regard to job security offices, all cases were not identified nor the emergency stabilization subsidy for SMEs were the details of all cases assessed. (established on December 1, 2008) 2. The above figures represent cases of suspension Source: Survey by MHLW implemented in or planned for October 2008 to June 2009 that were assessed as of April 17, 2009. 9 Source: Survey by MHLW
・ In the face of the severely deteriorating employment conditions, the government has implemented the following measures: (i) Maintaining employment ・ Relaxing the conditions and raising the rate of Employment Adjustment Subsidy, and offering an Immediate Employment Security Subsidy for SMEs. ・Establishing an incentive program to encourage companies to reduce overtime while retaining employment (aimed at stabilizing the employment of workers under fixed- term employment contracts or dispatched workers). ・ Investigating the company practice of withdrawing employment offers to fresh graduates, taking hold of the measures taken by universities and other schools against withdrawal of employment offers, and giving full advice to business (including publishing the names of companies that have withdrawn employment offers), while implementing job placement assistance to those who were declined a job offer by enhancing the consulting function of schools and universities. (ii) Support for the unemployed ・ Lending funds for living expenses and job-hunting activities to unemployed people who have lost their housing ・ Significantly expanding training programs for the unemployed and establishing and expanding a program to provide benefits to cover living expenses during the training period. (iii) Job creation ・ Supporting local efforts for job creation (by setting up funds)
[Chart 1-26 Outline of the Employment Adjustment Subsidy Program]
Business operators that are forced to reduce business activity because of declines in production volume caused by economic factors, such as cyclical economic changes, are granted subsidies that cover a part of wages and other costs when the business operators temporarily lay off employees, educate and train them, or send them on loan to other companies, or when the business operators maintain employment by reducing overtime work.
Workers covered by employment insurance: All workers Target regardless of whether they are permanent, temporary, or Economic downturn workers fixed-term workers (including new graduates) Temporary layoff事業活Large動 の enterprises縮小 に (employmentもかかわ adjustmentらず 雇 subsidy)用 を維持 Reduction of business activity Education and The subsidy rate for the expenses related to temporary layoffs, etc. training and for sending workers on loan to other companies: 2/3 Year-on-year decrease of 5% or more in the The amount of subsidies related to education and training: ¥1,200 production volume or the sales amount in the Sending workers most recent three months on loan to SMEs (the Immediate Employment Security Subsidy for SMEs) (SMEs incurring recurring losses in the other companies preceding fiscal year may be eligible for the The subsidy rate for the expenses related to temporary layoffs, etc. subsidy even if the decrease is less than 5%.) and for sending workers on loan to other companies: 4/5 The amount of subsidies related to education and training: ¥6,000 Reduction of overtime work ※ The upper limit on the daily amount is ¥7,730 (daily amount per worker)
Incentive funds for reduction of overtime work and Cases in which there are no dismissals, etc.* maintenance of employment Funds are provided to business operators that avoid dismissing, etc.* employed workers and dispatched workers by reducing monthly overtime work per employee by half or more and by more than five hours compared with the most recent six-month Increase in the subsidy rate period in order to stabilize employment for such workers. For business operators that receive the subsidy for Amount of funds Fixed-term contract workers Dispatched workers employment adjustments because of temporary provided (amount per employee; Upper limit: (amount per employee; Upper layoffs, etc., the subsidy rate is increased of they (annual amount) 100 employees) limit: 100 employees) avoid dismissals, etc.* SMEs ¥ 300,000 ¥ 450,000 Subsidy rate: Large companies 2/3 3/4 Large companies ¥ 200,000 ¥ 300,000 SMEs 4/5 9/10 *”Dismissal, etc.” includes the dismissal of employed workers, the termination of employment for fixed-term workers, and premature cancellation of contracts for dispatched workers for reasons on the side of business operators. As of April 1, 2009 10 [Column: 1,400 Job-Creating Companies]
On February 27, 2009, METI, in cooperation with the Ministry of Agriculture, Forestry and Fisheries and the Ministry of Health, Labour and Welfare published “1,400 Job-Creating Companies,” which is a list of SMEs and middle-ranking companies that are eager to employ workers as they recognize the recession as an opportunity to secure human resources. The list includes many companies which have advanced molding and metal processing technology and which actively pursue human resource development. Information concerning “1,400 Job-Creating Companies” has been made accessible via the Internet from Hello Work facilities and job cafes. In addition, the list was compiled as a two-volume book with a total of 1,600 pages and distributed to technical upper secondary schools and colleges of technology. On April 7, job-creation initiatives implemented by about 5,800 companies in 21 prefectures were published on METI’s website. There is also a plan to organize bus tours for job seekers and students from across the country to visit local communities and local companies and become aware of the attraction of local areas. These activities are expected to help resolve a mismatch between the needs of job seekers and the needs of employing companies.
Website (in Japanese): http://www.meti.go.jp/policy/mono_info_service/mono/sokeizai/kigyogaiyosyu.html
11 Chapter 2: Challenges and Prospects Facing Japan’s Monodzukuri Industries Section 1 Japan’s monodzukuri industries turn expanding limitations on resources and environmental constraints into a strength and continue to grow Natural resource prices are expected to remain unstable in the future regardless of economic downturns. It is necessary to promote the development of technology and activities to secure resources and enhance resource productivity by accelerating energy and resource conservation activities. (High volatility of natural resource prices) Prices of crude oil futures continued to rise from 2004 onward but plunged after hitting a high of US$147 per barrel in July 2008 and stood at the level seen around 2005 as of April 2009. In addition, the input price index dropped sharply in the latter half of 2008 because of a drop in prices of coking coal. However, it is necessary to keep a careful watch on natural resource prices, as a tightening of the supply-demand balance for exhaustible natural resources will become inevitable in the medium to long term due to the economic growth of BRICs and other countries. [Chart 2-1 Changes in Crude Oil Prices (WTI)] [Chart 2-2 Factors Constituting the Input Price (Dollar/barrel) Index of the Manufacturing Industry (compared 160 with the same period of the previous year)] Foods Chemical products 140 (%) Petroleum and coal products Ceramic, stone, and clay products 20 Iron and steel Non-ferrous metals 120 Textile products/pulp, paper, and wooden products 15 General machinery, precision instruments, electrical machinery, and transportation equipment Others All manufacturing sectors (compared with the same month of the previous year) 100 10
80 5
60 0 Price level of -5 40 2005 -10 20 -15 0 00 01 02 03 04 05 06 07 08 09 -20 (Year) └ 0 4 ┘└ 0 5 ┘└ 0 6 ┘└ 0 7 ┘└ 0 8 ┘└ 0 9 Source: New York Mercantile Exchange (Year) Source: BOJ "Input-Output Price Index of the Manufacturing Industry by Sector” (Recognition of the volatility of natural resource prices and response) Japan has strived to shift to industries to be oriented toward energy and resource conservation based on its experiences in the oil crises. However, because of the high volatility of natural resource prices that began at the beginning of 2007, the ratio of Japanese companies that recognize the volatility of natural resource prices as a risk has reached 44.6%. Japanese companies judge it necessary to introduce measures to reduce costs and strengthen their technology development capability in order to better deal with price volatility. [Chart 2-3 Recognition of the High Volatility [Chart 2-4 Measures Taken by Companies to Turn the of Natural Resource Prices] Volatility of Natural Resource Prices to Their Advantage] 0 10 20 30 40 50 60 70 0.3% 2.7% (%) 15.8% Introduction of cost-reduction measures 62.7 36.6% Enhancement of technology development capability 54.0 Development of new domestic markets 39.3 Market launches of products with high added-value (e.g. products with high energy-saving performance) 38.4 44.6% Development of new foreign markets 14.5 Recognizing the volatility as an opportunity to enhance Expansion of capital expenditure competitiveness. 12.1 Recognizing the volatility as a potential opportunity to enhance competitiveness. Enhancement of cooperation in the supply chain 11.8 Recognizing the volatility as risk because it is difficult to take advantage of it to enhance competitiveness It is impossible to make judgment at the moment. Active advertising and marketing 9.8
Others Others 0.6
Source: Survey by METI (December 2008) (n=1,868) 12 Source: Survey by METI (December 2008) (n=343) (Activities to secure natural resources) Japan is making active efforts to self-develop mines and obtain rights in natural resource development projects through M&As. In the past, Japan raised the ratio of self-development by obtaining rights to exploit and run copper mines as a strategic initiative regardless of market conditions. It is also desirable that with regard to other resources, the public and private sectors work together to make active investments against the background of a strong yen, in order to raise the ratio of self-development, which directly contributes to stable project management and enhancement of price competitiveness.
[Chart 2-5 Acquisition of Stakes in Copper [Column: Acquisition of Rights to Exploit and Run Mines by the Mines by Japanese Companies and Shifts in Japan-Korea Consortium] On October 17, 2008, the Japanese and Korean the Rate of Self-Development] (Posco) consortium agreed to jointly acquire a 40% of (￥1,000/ton) Prices of copper base (%) stake in Mamisa, a 100% subsidiary of the major metal in 2008 500 LME (prices of 50 Brazilian steelmaker CSN. Namisa plans to expand its copper base metal) 726.5 (￥1,000/ton) Self-development production of iron ore from 18 million tons in 2009 to 38 rate million tons in 2013. 400 40 METI actively supports this project from the viewpoint 40.2 of ensuring the stable supply of iron ore. It has been
300 30 providing low-cost funds through Japan Bank for International Cooperation, Nippon Export and I n v
e Investment Insurance and a reserve system for s t m I e I 200 n 20
n possible foreign investment losses. n v v t e e i s n I s I t n t m n m H v v e I u e e e n n s n c s I t v JFE Steel t t k t n m m i e l i n
v METI s e I n e
100 e 10 t I n e b n C m n n s C
v Nippon Steel Corporation e t t t a v e r m e o i n i e r n s n n l y d s e t l t Blast furnace Sumitomo Metal Industries, a m t n B e A m i ( h n l
t JBIC C e a Ltd. a n u steelmakers e i n t r a L n t u a n i a t n a s o t m E i i H Kobe Steel, Ltd. a n s i ( 0 0 S d ( n s i i C P C c n u j a A a h N o e ) a h (Year) p
u NEXI t l i
n Nisshin Steel Company, Ltd. i a o P a 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04l 05 06 07 p ( l e d c ( P m e r r o I ) a t i ) e n h o d r b m
r Trading d p p a t u r Itochu Corporation a o e a companies o ) ( s r n C K s k e ( a h o e
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Source: Compiled by METI based on data prepared by the l i s S z i Group of Japanese companies l h a t e a t ( ) i a e
) of Japan n A l k n e e
London Metal Exchange,u the Japan Mining Industry Association ( ) d C s Cooperation o e t f h r r a B and Japan Oil, Gas, and Metals National Corporationi l l e r
i Korea (Posco) a a ) z ) i l i a n
(Production expansion in resource-producing countries [i]) c o m p a n
In recent years, many plant construction plans have been realized in resource-producing y , N a
countries in the Middle East and in other regions that have been rapidly developing against a m i s background of the foreign currency inflow that comes when natural resources prices are a surging. These plans are intended not only to obtain a market share in the countries where plants have been built and in their neighboring countries, but also to gain an advantage in the procurement of natural resources by establishing a foothold in the resource-producing countries.
[Chart 2-6 Plants Owned by Japanese [Column: Sumitomo Chemical’s Strategy for Plant Companies in Saudi Arabia ] Construction (Rabigh Project)] The number of companies operating in Under the Rabigh Project, a joint venture set up by Saudi Arabia: 60 Saudi Aramco and Sumitomo Chemical Co., Ltd. will The following are examples: • Advanced Communications and Electronics Systems Co. (Sumitomo Corporation: 22%) adopt advanced oil refining technology and build a new • Chiyoda Petrostar Ltd. (Chiyoda Corporation: 49%) manufacturing plant for petrochemical products such as • JGC Arabia Ltd. (JGC: 40%) polyethylene. Through the Rabigh Project, Sumitomo The number of companies owning plants Chemical will be able to secure a production base in the in Saudi Arabia: 14 Middle East, which is a favorable region for the The following are examples: • DENSO Abdul Latif Jameel Co., Ltd. (Denso: 50%) procurement of raw materials, to significantly enhance • Saudi Factory for Electrical Appliances Co., Ltd. (Mitsubishi Heavy: 20%; Others) the profitability of its petrochemical business, and to • Unicharm Gulf Hygienic Industries Ltd. (Unicharm: 51%) • Kubota Saudi Arabia Company, LLC (Kubota: 51%)* strengthen its business foundation. • Isuzu Motors Ltd.* The number of chemical companies owning plants in Saudi Arabia: 5 The following are examples: • Eastern Petrochemical Co. (SPDC: 50%) • Rabigh Refining and Petrochemical Co. (Sumitomo Chemical: 37.5%) • Saudi Methanol Co. (Japan Saudi Arabia Methanol Company: 50%) Remarks: Included in the above are companies planning to start operating or to build a plant in Saudi Arabia (The mark * indicates a project in the planning stages.) Source: Compiled by METI based on data prepared by the Japan External Trade Organization 13 Rabigh petrochemical complex (Production expansion in resource-producing countries [ii]) Japanese steelmakers are building new production facilities and expanding existing ones in Brazil, which is the world’s largest producer of iron ore, in light of the growth of demand in Brazil and its easy access to the European and North American markets. METI has been providing active support to Japanese steelmakers’ activities in Brazil by organizing a ministerial visit to the country in June 2008 and by using a loan system of Japan Bank for International Cooperation. [Chart 2-7 Plants Owned by Japanese Steelmakers in Brazil] [Japanese Steelmakers’ Projects in Brazil]
JFE Steel (i) Nippon Steel The candidate site for the Planning to expand the Usiminas steel construction of a new steel plant plant (at a cost of approximately ¥1 million). (the Pecem region in Ceará state) (ii) Sumitomo Metals Building a new plant for the production of Capital participation by seamless pipes through a joint venture with Nippon Steel a French steelmaker (at a cost of Expansion of the Usiminas steel plant approximately ¥200 billion; scheduled to (Minas Gerais state) start operation in 2010). (iii) JFE Steel Sumitomo Metals Started a feasibility study on the The site of a new steel plant (Jeceaba in Minas Gerais state) construction of a new steel plant in cooperation with Vale, a Brazilian mining company, and Dongkuk Steel Mill of South Korea. Source: Compiled by METI (Current situation surrounding rare metals) Rare metals are vital for next-generation products and technologies related to the enhancement of resource productivity, which will represent the strength of Japan’s manufacturing industries. Global consumption of rare metals is growing because of factors such as the economic growth of emerging countries. As many rare metals are very scarce and unevenly distributed, the supply-demand chain could change significantly depending on the resource policy of rare metal-producing countries, among other factors. [Chart 2-8 Uneven distribution of rare metals [Chart 2-9 Producing countries of unevenly-
(as represented by the rate of production in the (Tons) distributed rare earths ] largest(%) producing country to the total production)] 120,000 100 90 100,000 80 70 60 80,000 50
40 60,000 30 China 20 40,000 10 0 l t h m s l m m m m n y e m m m m m m m m m m m m t m m 20,000 n a u h u u u u o n k u u u u u u u u u u u u u u u i t i i i i r e i i i i i i i i b i l i c l o r r n t n r n t U.S. i h d l o n d n n n a i b o d m s a n m e t a u a t t n a m a a e e s y Australia i o l o e a N n B g o l i t d C r l i a g l n i o I B r n l c h t Others i l L n r e e e b r e a m n a a B t h n N r i P r T R u India S a y B T T P a S e l V C Z A T o R
M 0 G
M 79 84 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07(Year) Remarks: Uneven distribution = the ratio of production in the largest producing country to the total production Source: U.S. Geological Survey “Mineral Commodity Summaries 2008” 14 (Rare earths vital for next-generation products) Rare earths such as neodymium and dysprosium, for example, are widely used as materials in high-performance magnets for motors of electric vehicles and the outdoor units of air conditioners. The use of rare earths greatly contributes to the enhanced energy-saving performance of next-generation products and the downsizing of such products. Therefore, in line with the growing demand for such products and their increasing diversity, demand for rare earths is expected to expand significantly. [Chart 2-10 Neodymium and Dysprosium, for which Demand is Expected to Grow in Line with [Column: Moves to Ensure a Stable Supply of the Diffusion of Next-Generation Products] Rare Earths (in Vietnam)] Major applications of Toyota Tsusho Corporation and Sojitz Corporation plan Major applications of high- to establish a joint venture together with LAVRECO, a neodymium and performance motors Vietnamese state-run company, in order to develop the dysprosium Dong Pao deposits. Deposits containing high High-performance motors Next-generation vehicles (e.g. concentrations of cerium and lanthanum, which are used and magnets electric vehicles) for precision polishing of liquid crystal displays and other glass products, have already been found in the Dong Pao region. In addition, there are hopes that deposits of heavy rare earths used for neodymium magnets will also be found there, as this region is located near ion-adsorption deposits in southern China. Annual production of rare earths in the Dong Pao deposits is estimated at 6,000 tons (equivalent to 30% of Japan’s annual consumption of Personal computers (HDD) rare earths, which amounts to approximately 20,000 tons), and production is scheduled to start in 2011 for an Home electric appliances operation period of 20 years. (e.g. air conditioners and Meanwhile, Showa Denko K.K. established a subsidiary washing machines) (90% owned by Showa Denko) in the Ha Nam province, south of Hanoi, in October 2008, to produce alloy Industrial machinery materials for rare earth magnets and started the Source: Compiled by METI (e.g. robots) construction of a plant in November of the same year. At the plant, the company plans an annual production of 800 (Activities to secure a stable supply tons of dysprosium, which is necessary for the production of rare metals) of neodymium magnets used in hybrid vehicles. Given the importance of rare metals in Japanese manufacturing, securing a stable supply of them is a critical task. To secure a stable supply, it is necessary for Japan to continue its active efforts to diversify the supply sources through strategic resource diplomacy and joint exploration with resource-producing countries, and to develop recycling technology and alternative materials.
[Chart 2-11 Locations of Ongoing Joint Survey Projects] [Chart 2-12 Promotion of the Development of Materials as Alternatives to Rare Metals] Canada Selwyn area Project to Develop Materials as (Tungsten) Alternatives to Rare Metals Kazakhstan Developing technologies for Ushkol-Mulaly area (Tungsten) commercialization that should be realized quickly in order to improve the energy intensity. Vietnam Lao Cai province - Yen Bai Development started in fiscal 2007 province (Rare earths) Brazil Aguapeí area (i) Indium (transparent electrode) (Copper, nickel, (ii) Dysprosium (rare earth magnet) platinum group metals) Indonesia (iii) Tungsten (carbide tools) Kajong area (Indium) Peru Pashpap area (Molybdenum and Potential survey under way indium) South Africa (Rare earths) Development started in fiscal 2009 Potential survey under way Australia (iv) Platinum (exhaust gas purifying Lobatse, Botswana Border area (Rare metals) (Rare earths) catalyst, etc.) Explanatory notes: (v) Terbium, europium, etc. (fluorescent Basic survey for joint resource development (ODA survey) materials) (vi) Cerium (precision polishing Project to establish infrastructure for the promotion of development of rare metal resources materials, etc.) Establishment of infrastructure to promote the development of rare metals for rationalization of energy use
Source: Compiled by METI based on data prepared by Japan Oil, Gas and Metals National Corporation 15 Source: Compiled by METI (Impact of environmental constraints on corporate management) As countries are strengthening their efforts to prevent global warming and ensure appropriate management of toxic substances, the manufacturing industry of each country is required to comply with regulations. The number of standards that are required to be met as a procurement condition and the number of sales destinations that require compliance with environmental regulations as a procurement condition are increasing every year, and the required standards are becoming more and more stringent. These requirements have non- negligible effects on purchasing and sales activities, as well as on the valuation of in-house manufactured goods. [Chart 2-13 Procurement Conditions [Chart 2-14 Companies’ Recognition of Required by Sales Destinations Standards Required by Sales Destinations Related to Environmental Regulations] as Procurement Conditions] 0 10 20 30 40 50 60 70 80 90 (%) Elimination/reduction of chemical 79.4 Feeling a burden, as sales destinations Feeling a burden, as multiple sales substances with high risks 73.1 require compliance with standards destinations require compliance related to environmental regulations 50.3 with different standards Design that gives consideration to recycling 32.2 as a procurement condition Design that gives consideration to reducing 25.0 the amount of resources use 13.9 19.6% Design that gives consideration to energy- 21.3 28.1% Feeling a burden, as 19.6 saving performance Sales destinations do not require sales destinations Reduction of CO2 emissions through overall 19.4 compliance with standards 35.1% require compliance life cycles such as production, logistics, etc. 11.0 related to environmental with standards more Acquisition of in-company environment 16.9 regulations as a procurement rigorous than law management systems and specifications 13.9 15.5% Acquisition of domestic environmental 6.6 Not feeling a burden, although sales labels (e.g. “eco mark”) 8.6 destinations require compliance with standards related to environmental Acquisition of foreign environmental labels 1.6 (e.g. Blue Angel) 1.2 regulations as a procurement Large companies condition 2.2 SM Es 36.8% Others 1.2
Source: Survey by METI (December 2008) (n=790) Source: Survey by METI (December 2008) (n=547) (Response to environmental constraints: [i] The fight against global warming) A survey showed 64% of the companies that perceive an impact from regulations related to the fight against global warming as replying that promoting energy conservation and reduction in greenhouse gas emissions through technology development is a task that must be performed. There are hopes that environmental technologies, including energy-saving technologies developed by Japan, will be actively used to reduce global emissions of greenhouse gases, including emissions in developing countries.
[Chart 2-15 Tasks to be Performed to Comply [Column: Spread of Japanese Environmental Technology to with Regulations Related to the Fight Against Other Countries through the CDM (Toshiba)] Global Warming] Since September 2005, Toshiba Corporation has been engaging in a CDM (Clean Development 0 20 40 60 80 (%) Mechanism) project to reduce greenhouse gas Promotion of energy conservation emissions in Vietnam. Specifically, Toshiba introduced 64.1 and greenhouse gas reduction an anaerobic fermentation tank at a waste water Acquisition of domestic certification treatment facility of a starch processing plant, thereby 30.3 by an external organization curbing the emissions of methane generated from Improvement of the appeal to end waste water. 22.2 users The company aims to enable risk control regarding Acquisition of foreign certification 10.4 new foreign projects by introducing its own proprietary by an external organization methane-fermentation technology that meets the needs Technology transfer to domestic and 8.3 of developing countries and to expand its foreign business partners environmental business abroad through CDM projects. M anagement of the carbon footprint 7.3
Development of carbon-offset- related products, etc. 5.8 Securing of emission rights such as 4.8 CER
Others 1.3 Source: Survey by METI (December 2008) (n=374) 16 An outside view of an anaerobic fermentation tank (Response to environmental constraints: [ii] Efficiency enhancement through reorganization of logistics systems) In the future, Japan’s manufacturing industries intend to increase the outsourcing of work to logistics business operators which are advanced in implementing environmental protection measures, and there are high hopes that the burden on the environment will be reduced through the consolidation of production and sales facilities, consolidation of procurement and distribution routes, and joint distribution of products with other companies. In addition, amid a growing awareness that streamlining logistics systems directly contributes to cost reduction, efforts to reduce CO2 emissions through innovations in distribution are being strengthened.
[Chart 2-16 Criteria for the Selection of Logistics [Column: Logistics Innovation by Toray Industries Inc.] Business Operators to which Logistics For the manufacturing industry, the introduction of Operations are to Be Outsourced (Around five measures to reduce costs and CO2 emissions in the logistics years later)] sector is becoming an important strategy for enhancing Being advanced in taking environment-friendly competitiveness. Compared with the manufacturing sector, 32.7 measures which has enhanced production efficiency through daily Offering high-quality logistics operations and 31.1 “ ” work kaizen (improvement) efforts, the logistics sector has a Offering low logistics costs 26.3 great deal of room to enhance efficiency. Through a logistics innovation carried out from the Ensuring thorough legal compliance 19.1 viewpoint of the environment, safety, and efficiency, Toray Assuring work safety 13.5 Industries Inc. succeeded in reducing the CO2 emissions Being a group company 4.4 factor by around 8% over the past two years while cutting costs in the logistics sector. Having a high consulting capabilities 4.0 For example, in the transportation of materials, which are Having high-level technology for building information systems 2.4 shipped in large lots, the company enjoyed benefits, in terms Being capable of providing global services 2.4 of cost and environmental friendliness, by shifting from land Being well-experienced in handling products in transportation to vessel and railway transportation, for which 2.0 the industry to which the respondent belongs regular service is common. In addition, the company Others 0.4 expanded the size of their vehicles and increased their Don't know/can't predict 6.0 loading capacities through consultations with logistics business operators with due consideration of the lot size and No change expected 47.4 shape of transported products. (%) 0 10 20 30 40 50 Such internal and external collaboration will be the key to enhancing the efficiency of logistics systems for the Source: MLIT “Survey concerning the improvement of an manufacturing industry. environment for promotion of the 3PL business” (n=412) (Response to environmental constraints: [iii] Promotion of the “3Rs”) The main objective of the 3Rs (reduce, reuse, and recycle) Initiative has shifted from ensuring the appropriate treatment of wastes and achieving the legally required recycling rate to ensuring stable procurement of materials and enhancing competitiveness through cost reduction. For example, as a way to minimize wastes for materials and enable a stable supply of materials, efforts are being strengthened to reuse products without lowering their quality, in addition to recycling, which leads to a reduction of product quality.
[Column: Copier Recycling Business of Ricoh [Chart 2-17 Comet Circle] Co., Ltd.] Raw materials Ricoh Co., Ltd has been engaging in the 3Rs supplier Initiative regarding used products based on its Parts Materials Product maker maker group-wide Environmental Action Plan. Through maker Seller sales of recycled copiers, use of recycled parts, Closed-loop Reuse of Reuse of parts User of material cycle and use of recycled plastics, the company is products recycled materials reducing the burden on the environment, and in Recycled in-house Turning into raw materials Oil liquefaction ・Chemical recycling fiscal 2007, the 3Rs division turned profitable on a Product Parts Materials recycling business operator Maintenance ・metallurgy recycling User service provider recycling recycling business operator Refining non-consolidated basis. Based on the Comet Machines center center business operator Circle concept, Ricoh is also striving to improve recycled in-house Open-loop Metals material cycle Energy recovery Heat energy (energy, CO2) the quality of recycled products and making active Recovery Segregation and recovery business efforts to expand “closed recycling,” in which parts center dismantlement Cracked oil operator Recycling of used copiers are reused as parts of new copiers. Shredding center Final disposal business operator business operator Comparison with fiscal 2003 Item Crushing of whole products Shredder dust Reclamation Fiscal 2005 Fiscal 2006 Fiscal 2007 [Comet Circle]: The upper route performs functions as the artery and the The number of recycled Up 3.1-fold Up 5.1-fold Up 7.9-fold lower route functions as the vein. Resources provided by the raw materials copiers sold supplier in the upper right moves from the right to the left through the upper The volume of reused route and turns into a product during the process, while used products Up 2.3-fold Up 3.2-fold Up 5.0-fold parts move from the left to the right through the lower route. The more inner a circle is, the more difficult it is to complete but the more effective it is in The volume of recycled 578t 1,132t 1,346t reducing the burden on the environment. plastics used 17 (Response to environmental constraints: [iv] Development of a system for managing chemical substances) Internationally, there is a growing move to require the strengthening of regulations concerning the production and use of chemical substances and companies’ voluntary efforts concerning the management of chemical substances. In Japan, too, the Act on the Evaluation of Chemical Substances and Regulation of Their Manufacture, etc. was reviewed. From now on, it will be necessary to quickly improve the framework for information management by unifying formats concerning the management of chemical substances and by coordinating different information management systems.
[Chart 2-18 Tasks to Be Performed to [Column: Promotion of the Management of Chemical Comply with Regulations Related to Substances in the Entire Supply Chain] Chemical Substances] Hitachi Ltd. established an environmental information distribution infrastructure, based on its own infrastructure for company-to- 0 20 40 60 company e-commerce transactions, by unifying the formats of all (%) information communication sheets with the formats of sheets adopted Reduction of the amount of regulated 58.7 by the Joint Article Management Promotion-consortium (JAMP) in chemical substances used through 43.2 technology development order to promote the management of chemical substances in the entire supply chain. In July 2009, the company plans to start a SaaS Development of alternative 46.0 (Software as a Service) business applications service, including substances 41.0 connection with the JAMP information infrastructure. Establishment of a platform for Makers using Company European importer Product maker A’s database information sharing (information 33.7 25.2 Materials maker system) Information Information communicati communicati Company A on sheet on sheet Environmental Parts maker Unification of indication formats 31.2 Information distribution information through the supply chain 22.5 infrastructure developed database by Hitachi Product maker “TWX-21” Cooperation JAMP 3.0 Others Information Makers using Company 5.9 EEnvironmentalnvironmental Infrastructure B’s database iinformationnformation ddatabaseatabase Materials maker Large companies SMEs Information Information Company B communicati communicati Information Environmental Parts maker on sheet on sheet communicati information Source: Survey by METI (December 2008) (n=847) on sheet database Product maker Parts maker Materials maker (Activities to improve resource productivity) Amid growing environmental constraints, about 60% of the companies surveyed are striving to improve their resource productivity, which will lead to effective use of resources and reduction of greenhouse gas emissions through energy conservation, resource conservation, and development of alternative materials. Priority tends to be placed, for example, on enhancing production efficiency through the reduction of the use of materials and the promotion of energy conservation in the manufacturing process.
[Chart 2-19 Status of Activities to Enhance *“Resource productivity” refers to the quantity of value added In-House Resource Productivity] per unit of input of resources (natural resources, raw materials, and energy). Not Specifically, technology with high resource productivity refers planning to Making to technology that realizes energy conservation or recycling of resources as well as new energy technology. Products with make active efforts high resource productivity include next-generation efforts automobiles, energy-saving home electric appliances, solar 17.5% 14.1% cells, and highly efficient industrial machinery. Highly efficient coal-powered thermal plant Considering Solar cells making Making efforts 19.6% efforts 48.8%
Source: Survey by METI (December 2008) (n=1,874)
18 Next-generation automobile (Competitive environment and the need for products with high resource productivity) As an activity to improve resource productivity, many Japanese companies are placing a top priority on expanding the domestic market, whereas only 12.6% are trying to gain a market share in foreign markets. Given that major competitors are mostly domestic companies at the moment, products related to the enhancement of resource productivity may become an area of strength for Japan. [Chart 2-21 Major Competitors Concerning [Chart 2-20 Activities of High Priority for Products Related to the Enhancement of Enhancing Resource Productivity] Resource Productivity] 0 10 20 30 40 (%) North Companies Expansion of the domestic market 37.8 American in other Securing new procurement routes for companies regions raw materials/fuels 33.9 1.8% 0.7% Almost no European competitors Intensive investment in technology 25.8 companies 11.5% development 2.6% Securing human resources with high value added 23.1 Asian Securing sales channels 18.8 companies 17.7% Enhancement of cooperation in the 14.0 supply chain Domestic Acquisition of shares in foreign 12.6 competitors markets 65.7% Others 2.0
Source: Survey by METI (December 2008) (n=1,614) Source: Survey by METI (December 2008) (n=1,735)
As the need for products with high resource productivity are growing both in Japan and abroad, competition involving foreign companies as well as domestic ones is expected to intensify. Indeed, an increasing ratio of Japanese companies are feeling a sense of crisis, with about 60% perceiving that their lead over foreign competitors is narrowing or that they are losing competitiveness.
[Chart 2-22 The Need for Products with High [Column: Strengthened Energy Efficiency Standards Resource Productivity] for Air Conditioners in China] (Compared with five years ago) In March 2009, the Chinese government significantly raised the energy efficiency standards for air conditioners, 0% 20% 40% 60% 80% 100% forcing domestic manufacturers to shift to the production of inverter-based models. The strengthening of environmental standards in China and other countries are expected to benefit Japan’s manufacturing industries, Domestic need 61.6 36.6 which have the world’s highest level of energy 1.8 conservation technology.
Figures in parenthesis=Energy efficiency standards (Unit: Btu (total cooling capacity)/Wh (electricity volume)) Need in advanced Old New 46.5 52.3 Product performance level foreign countries class/standard class/standard ※ The level of 1.2 Class 1 (3.6) Prescribed level for energy efficiency popular models in certification under Japan is 9.0 or higher. Need in Class 1 (3.4) Class 2 (3.4) the new standard 70.1 Minimum level developing 28.1 High-end models allowed for sales under countries Class 2 (3.2) Class 3 (3.2) in China the new standards 1.8 Average level of Class 3 (3.0) inverter-based Growing Unchanged Declining models when the old standard was Class 4 (2.8) applicable Popular models Level of non-inverter in China Class 5 (2.6) models
Source: Survey by METI (December 2008) (n=1,430) (Note) Applicable to models with an average cooling capacity of 4.5kW or lower 19 Source: Compiled by METI (Future target markets for products with high resource productivity) Currently, Japanese companies mainly sell products with high resource productivity in the United States, Europe, and Asia. Many companies are placing a priority on emerging markets like China, India, and Russia as future target markets. In order to continue to show strength in products with high resource productivity, it is essential for Japan’s manufacturing industries to enhance their international competitiveness through active business strategies and development of technology. In addition, while overseas demand is sluggish for the moment amid the global recession, it will be necessary in the medium to long term to aim to capture overseas demand in a strategic manner. [Chart 2-23 Target Markets for Products with High Resource Productivity]
Source: Survey by METI (December 2008)
20 Section 2 Japan’s monodzukuri industries strive to enhance the level of manufacturing (monodzukuri) capability It is critical for monodzukuri industries to review their field capability and R&D capacity and brush up their management resources, in order to overcome the rapid changes that have occurred and that will continue to grow. (Review of manufacturing capabilities) The productivity of Japan’s manufacturing industries is said to be high, and 90% of the companies surveyed said that the technical skills of factory workers are improving. On the other hand, however, there are signs of some problems, as shown by the presence of companies expressing concerns over the scarcity of communication between workers and a shortage of core personnel capable of passing on their techniques and skills to others. [Chart 2-24 Techniques and Skills of [Chart 2-25 Issues and Problems Related to Factory Workers] Information Sharing among Workers] 0% 20% 40% 60% 80% 100% 0 20 40 60 80 (%) 0.2 Techniques and skills of individual worker cannot 60.5 be standardized. 63.3
5.4 38.0 42.9 10.9 0.8 There is a shortage of core personnel who can 51.7 pass on their techniques and skills. 68.4
1.8 Workers cannot make effective use of 40.3 accumulated information. 47.7 Significantly improving Improving Because of the weakening of the relations Improving somewhat Deteriorating between workers, they do not share information 13.6 34.2 Deteriorating Significantly deteriorating voluntarily. No reply Because of an increase in non-regular workers, 8.2 information sharing is difficult. 9.3 [Level of Communication between Factory Workers] Information sharing between the R&D and 8.1 production divisions has not advanced. 11.8 0% 20% 40% 60% 80% 100% Because of the large number of people involved in information sharing, information is not 4.3 6.3 3.6 2.7 adequately managed. Companies experiencing improvement in the skills of As worker turnover is high, information sharing 3.0 workers level 34.5 43.1 14.5 0.31.3 is not adequate. 10.5 Companies experiencing Others 1.3 11.77 deterioration in the skilles of Growing very close Growing close workers level Growing somewhat close Growing somewhat scarce No reply 6.0 Growing scarce Growing very scarce 0.8 No reply Remarks: Multiple replies were allowed. Source: Survey by METI (January 2009) Remarks: n=1,840 The number of companies experiencing improvement in the skills of workers level: 1,589 (Importance of direct communication The number of companies experiencing deterioration among factory workers) in the skills of workers level: 237 Although the use of IT has advanced the productivity, many companies think that it is important for workers to share information through direct communication with each other. Regarding trouble and problems that occur at the factory site in particular, more than 80% of the companies surveyed felt the need for direct communication among workers.
[Chart 2-26 Information Requiring Direct [Column: Promoting the Use of IT in the Production Communication] Processes and Fostering Close Communication among Workers at the Same Time] 0 20 40 60 80 100 (%) (Daicel Chemical Industries Ltd.) Information concerning troubles and problems Amid concerns that the use of IT may isolate technology 81.6 that occur at the factory site from the outside world or lead to a lack of sufficient Information concerning the business process communication among workers, Daicel Chemical standards and business operations at the 54.4 factory site Industries Ltd. is trying to enhance the skills of its workers Information related to customers and by training them intensively at a training plant not consumers such as customer satisfaction, 50.4 equipped with advanced IT, while promoting the use of IT needs, and complaints at the factory site. Information concerning the objectives and [Plant for training] 47.2 plans of the production division In addition, the company holds daily meetings Information concerning employees' techniques, in which the relevant skills, etc. 41.5 parties analyze
Others 0.5 trouble reported by factory workers as a way to foster closer No reply 1.9 communication between workers Source: Survey by METI (January 2009) Remarks: Multiple replies were allowed. n=1,840 21 (Transfer of skills across corporate borders) More than 20% of the companies surveyed are making efforts not only to ensure that skills are passed on among its own workers but that these skills are also passed on to their suppliers, thereby enhancing the manufacturing capabilities of their business partners as a whole. This trend is particularly notable in the transportation equipment industry and the precision machine industry, which require close coordination between machinery makers and parts suppliers. In most cases, workers of machinery makers visit suppliers in person to provide direct instruction.
[Chart 2-27 Rate of Companies Providing Skills [Column: Transfer of Skills through Local-Area Transfer Support to Suppliers] Collaboration] 0 10 20 30 40 (%) At the Mizushima chemical complex, Asahi Kasei, Transportation equipment manufacturing Mitsubishi Chemical, Nippon Petroleum Refining, and 32.8 industry (n128) Japan Energy are leading efforts to jointly train plant Precision instruments manufacturing 30.6 industry (n=108) operators adept in safe plant operations and emergency Metal products manufacturing industry 24.4 response (this program initially started as a joint initiative of (n=225) General machinery manufacturing METI, academia, and industry to develop core personnel 21.9 industry (n=151) for the manufacturing industry but is now managed Electrical machinery manufacturing 21.0 independently). industry (n=195) In addition to field practices using a simulation plant, such All of the above industries (n=1840) 22.9 as exposure to simulated problems and facility Remarks: n=1,840 management experiences, the training program includes [Chart 2-28 Details on the Skills Transfer courses in theoretical studies, including a course in the Support Provided to Suppliers ] principles of risk management, which are provided in 0 20 40 60 80 (%) cooperation with Okayama University and Yamaguchi The respondent's own workers provide direct 77.5 University. The program thus combines theory, experience, instruction in techniques and know-how. and practice. Support is provided through informal 27.5 Previously, the companies provided their own educational communication among workers. courses. By cooperating with each other, they can now Workers of suppliers participate in the 13.0 respondent's education and training programs supplement their areas of weakness and provide more Information concerning techniques and know- systematic education and training. 9.1 how is shared through a database. [Liquid sealing lesson at a [Hanging on to the rope in the mini-plant ] experiential “plunging” lesson] Others 4.4
No reply 1.8
Source: Survey b y METI (January 2009) Remarks: Multiple replies were allowed. n=386 The above figures are based on the replies provided by companies providing support. (Diversification of joint R&D activities) Joint R&D with other companies is becoming increasingly important as a way to incorporate external technologies and ideas. About 40% of the companies surveyed were engaging in joint R&D, with 25.3% engaging in joint R&D with companies other than existing business partners. [Chart 2-29 Existence of Joint R&D with [Chart 2-30 Specific Joint R&D Partners Companies with which there Were No Previous (Excluding existing business partners)] Business Relations] 0 10 20 30 40 50 60 Implementation (%) Domestic companies in a different sector than 55.5 Others No reply of joint R&D the respondent's own sector 0.4% 1.7% 40.0% Research organizations including universities 43.7 Domestic companies in the same sector in 23.4 Implementation of joint which the respondent has existing business Domestic companies in the same sector as the 20.9 R&D with companies respondent other than existing Government or public organizations 16.1 Foreign companies in a different sector than the business partners 6.9 respondent's own sector 25.3% Foreign companies in the same sector as the 5.8 respondent Not implementing Foreign companies in the same sector in which Implementation of 2.6 joint R&D the respondent has existing business partners joint R&D only 58.0% Others 0.9 with existing business partners No reply 0.6 14.7% Source: Survey by METI (January 2009) Remarks: Multiple replies were allowed. n=465 Source: Survey by METI (January 2009) The above figures cover joint R&D partners with which the 22 respondent had no previous business relations. (Results of cross-sectoral cooperation) Companies engaging in cooperation with other companies in different business sectors from their own have a greater appreciation of the results of joint R&D than those engaging in other types of cooperation, and in light of this, cooperation across different business sectors may be expected to promote innovation.
[Chart 2-31 Results of Joint R&D] [Column: Industrial Innovation Organization ]
0% 20% 40% 60% 80% 100% The government submitted a bill to amend the Act
0.8 on Special Measures for Industrial Revitalization, Companies engaging in 10.2 65.4 22.2 1.5 etc. for the Purpose of Promoting Innovation in cross-sectoral cooperation
0.6 Industrial Activities in Japan to the 171st session of Companies cooperating with companies other than 7.7 66.0 23.2 2.4 the Diet, and the bill was enacted on April 22. The existing business partners bill provides for the establishment of the Industrial 3.0 1.5 Companies cooperating Innovation Organization, which will provide funds with existing business 59.6 25.2 10.7 partners only for business activities that create new added-value through open innovation. Achieved better-than-expected results Achieved expected results Government Achieved smaller-than-expected results Achieved no results
No reply Funds earmarked under the initial budget for fiscal 2009:￥40 billion Investment from the Investment private sector Source: Survey by METI (January 2009) Industrial Innovation Organization Remarks: The number of companies engaging in Industrial Board of To select the targets cross-sectoral cooperation: 266 Delegating the authority to Innovation of investments made make decisions concerning directors by the organization The number of companies cooperating with companies important matters Committee
other than existing business partners: 465 Investment Investment from the ・Attracting private-sector private sector personnel The number of companies cooperating with existing Investment partnership may ・An organization with a Investment partnership be established depending on business partners only: 270 fixed-term of 15 years the circumstances Large Venture company A Technology Companies, Technology company C and human and human resources etc. resources SME B University D (Issues to be resolved for the promotion of joint R&D) Because Japan’s manufacturing industries have been based on stable, long-term business relationships between companies, it faces unique issues that must be resolved for the promotion of cooperation across different business sectors, such as the need for coordination of inter- organization communications and the risk of classified information being leaked. In order to resolve these issues and promote innovation, governmental support will be necessary in addition to efforts by the companies concerned. [Chart 2-32 Unsatisfactory Points Concerning Joint R&D] [Column: Partial Amendment of the Unfair 0 10 20 30 40 (%) Competition Prevention Act] Coordination of work through inter-organization 33.8 ― Improvement of the environment for open communications took time. 28.9 innovation ― Differences arose in the purpose and objectives of 24.4 joint R&D. 21.5 Joint R&D requires partners to disclose their trade
There was a risk of information leakage. 18.0 secrets to each other and use the secrets together. 8.5 For this, the establishment of an institutional Adequate results were not achieved as a result of the respondent's lack of ability to absorb information and 12.8 11.5 framework that ensures appropriate protection of knowledge from the partner. The level of ability and motivation of the partner's 12.0 trade secrets is vital. employees was not as high as expected. 10.7 In order to better protect trade secrets held by The respondent felt a sense of unfairness about the 8.3 companies, METI submitted a bill to partially sharing of capital expenditures. 6.7 The respondent felt a sense of unfairness about the amend the Unfair Competition Prevention Act to allocation of research results and ownership of 7.5 5.9 intellectual properties. Companies implementing cross- the 171st session of the Diet, revising the It was difficult to have the respondent's opinions sectoral cooperation requirements of the offense of the infringement of reflected in joint R&D because of the partner's 4.5 3.7 excessive intervention. Companies cooperating with trade secrets. existing business partners Others 4.9 4.1 Source: Survey by METI (January 2009) Remarks: Multiple replies were allowed No reply 21.8 24.8 The number of companies implementing cross-sectoral cooperation: 266 The number of companies cooperating with existing business partners: 270 23 (Pursuing cross-sectoral cooperation and maintaining existing business relations at the same time)
Japan’s manufacturing industries are said to have accumulated technical and coordination skills by identifying the desirable direction of technology development through stable, long-term business relations between companies. Therefore, the diversification of the structure of business relationships could undermine companies’ accumulation of technical skills. However, companies that are pursuing cooperation with other companies in different business sectors from their own have not experienced a weakening of their relations with existing business partners, which suggests that they are maintaining their relations with both new and existing business partners.
[Chart 2-33 Business Partners with which [Chart 2-34 Changes in Ties with Existing Stronger Ties are Desirable] Business Partners] 0% 20% 40% 60% 80% 100% 0% 20% 40% 60% 80% 100%
All companies 42.0 54.6 3.4 All companies 79.5 17.0 3.5
Companies not implementing joint R&D 44.9 52.7 2.4
Companies implementing cross-sectoral Companies not implementing joint R&D 79.2 18.5 2.3 34.2 65.0 0.8 cooperation
To put a priority on existing business partners and strengthen ties with them Companies implementing cross-sectoral 82.0 16.5 1.5 To strengthen ties with new business partners cooperation No reply Business ties are growing closer Business ties are growing weaker No reply Source: Survey by METI (January 2009) Remarks: The total number of companies: 1,840 The number of companies not implementing joint R&D The number of companies implementing cross-sectoral cooperation (Changes in the design concept concerning product safety) The design concept concerning the enhancement of product safety has evolved in a variety of ways, with 70% of the companies surveyed cooperating with business partners in this regard. Such cooperation tends to be implemented more often in response to product accidents than in advance. [Chart 2-36 Details on Cooperation with [Chart 2-35 Changes in Product Design Concept] Business Partners] 0 20 40 60 80 100 0 20 40 60 80 (%) (%) Investigating the causes of the Design that meets appropriate safety 84.2 After the problem and sharing information with 63.3 specifications and standards 59.6 occurrence the partner Design that prevents product 40.5 of a Sharing information concerning 33.3 breakdown problem complaints from customers and 54.3 Design that prevents accidents when 31.8 consumers used by consumers in an inappropriate 17.8 manner Deliberating on safety in the product Design that prevents consumers from 48.2 28.5 planning stage using the product in an inappropriate 14.7 manner Sharing information with the partner Design incorporating the concept of 21.1 Before the so as to prevent design-related 45.8 "fail safe" 11.2 occurrence problems Design that prevents accidents when of a Setting rigorous design and safety 17.0 used by unexpected users (e.g. young 8.7 problem standards and sharing them with the 29.3 children) partner Design that can function when existing 11.2 6.8 Providing joint education and training parts are replaced with other parts Now 18.8 regarding product safety 2.7 Five years ago Others 1.5 Others 1.1 9.5 No reply 30.5
No reply 0.6
Source: Survey by METI (January 2009) Source: Survey by METI (January 2009) Remarks: Multiple replies were allowed. n: 1,720 Remarks: Multiple replies were allowed. N=1,211 The above results are based on the replies given The above results are based on the replies given by companies by the companies that said the safety of their that said they are cooperating with business partners so as to products is improving. 24 enhance product safety. (Variation of activities to ensure product safety according to the company size) Amid the globalization of corporate activities and the diversification of the procurement environment, the risk of defective parts and materials being used in the production process is expected to increase. However, recognition of this risk and the measures taken to deal with it vary according to company size. SMEs may find it difficult to take measures to deal with this risk because of constraints in terms of know-how and corporate strength. [Chart 2-37 Risk of a Product Accident Occurring [Column: An SME that Obtained Difficult-to- because of a Defect in a Procured Component] Acquire International Organic Certification] 0% 20% 40% 60% 80% 100%
2.2 0.0 ― Heart Co., Ltd.― Large companies 16.5 39.0 34.1 5.5 2.7 In pursuit of purely organic products, Heart Co., Ltd., a company with a workforce of 20 people, that designs, 3.7 1.1 manufactures, and sells bedding using organic cotton, has SM Es 10.7 27.8 29.2 18.6 8.9 established a traceability system that verifies
Strongly feel there is a risk Feel there is a risk manufacturing records based on the lot number attached to Feel there is somewhat of a risk Do not feel there is much of a risk each product. In all processes, the company conducts Do not feel there is a risk Feel there is absolutely no risk No reply fluorescence inspection and document-based verification, Remarks: The number of large companies: 182 and monitors the operations of partner companies in order The number of SMEs: 1,653 to preclude contamination with and inclusion of chemicals [Chart 2-38 Activities to Prevent the Inclusion of in their materials. In 2005, the company acquired Defective Procured Components] international certification by Ecocert, an organic 0 20 40 60 80 (%) certification organization, and its sales channels have 68.1 Procuring only from reliable suppliers 64.6 rapidly expanded as a result of the acquisition of this certification. Conducting rigorous checks when receiving 67.5 products from suppliers 52.2 Strengthening information-gathering regarding 54.0 the materials and ingredients of procured 32.7 components Shifting to higher quality standards and 50.3 specifications 31.8
4.3 Others 1.7
0.6 No reply 0.4 Large companies SMEs Remarks: Multiple replies were allowed. n=1,286 (Measures against the inclusion of counterfeit elements in procured parts and raw materials) More than 50% of the companies surveyed are concerned about the risk of counterfeit elements being included in procured parts and raw materials, and about 10% have become victims of such counterfeiting. Regarding measures against the inclusion of counterfeit elements in procured parts and raw materials, SMEs apparently bear a heavy burden relative to their level of know- how and corporate strength. [Chart 2-39 Risk of Counterfeit Parts or [Chart 2-41 Details of Measures Against the Materials Being Included] Inclusion of Counterfeit Elements in Products] Recognize the risk as a problem, No reply 0 1020304050 having incurred damages as a (%) 7.1% result of it 8.4% Maintaining close communications 48.6 with business partners 27.2
Recognize the risk as a Reviewing the system for receiving 46.7 Do not recognize the problem, but have not procured products 40.3 risk as a problem incurred damages as a result of it 39.7% Making sure to conclude strict 43.0 44.9% contracts with business partners 18.3 Remarks: n=1,840 Reviewing quality standards and specifications regarding procured 40.2 34.8 [Chart 2-40 Reason for Incurring Damages] products 0 20 40 60 (%) Applying rigorous checkpoints for 31.8 the receipt of procured products 28.0 The system for checking procured 41.2 products upon receipt was inadequate. 52.2 Adopting rigorous management of 21.5 procured products jointly with Adequate information concerning 23.5 12.5 business partners procured products failed to be obtained. 25.0 (e.g. management of procured Adequate information concerning the 7.5 35.3 5.3 procurement route of procured products products based on serial numbers) 22.1 failed to be obtained. 6.5 5.9 Others A contract had not been concluded. 10.5 18.4 Large companies 0.9 There were inadequacies and unclear 11.8 No reply SMEs points in the contract. 6.6 2.8 Remarks: The number of SMEs: 136 11.8 Others Remarks: The number of SMEs: 869 8.8 The number of large companies: 17 The number of large companies: 107 0.0 Large companies No reply 8.8 SMEs 25 Source: Survey by METI (January 2009) (New trends in the manufacturing industry) In order to differentiate products from low-cost products made in other countries, companies are enhancing customer satisfaction by combining product sales and services and manufacturing products featuring “kansei value” with an emphasis on the manufacturer’s care for users and users’ preferences. “Collaboration between agriculture-commerce-industry,” a move to blend manufacturing with the agriculture, forestry, and fisheries sectors, is also expected to expand the potential of Japan’s manufacturing industries.
[Column: Provision of Added Value that Transcends [Column: Kansei-Japan Design Exhibitions Held in Manufacturing] Paris and Tokyo] ― Air conditioner maker A ― Designating the three years from fiscal 2008 as the Air conditioner maker A provides a service that enables “Kansei Value Creation Years,” METI held exhibitions in energy-saving operation of air conditioners based on the Paris (December 2008) and Tokyo (January 2009) in use of information sent from a weather satellite as well order to communicate, throughout Japan and to other as a pre-accident maintenance service. The company countries, the concept of an economic value which we call “kansei (aesthetic) value,” which is contained in enhances customer satisfaction by enabling energy Japanese products. conservation and reducing equipment maintenance “Kansei value” is a value that materializes when a costs. It does business in China, Europe, and North product appeals to the aesthetic sense of the people and America, as well as in Japan. arouse their emotions and empathy. The Kansei-Japan The telemonitoring center of Company A Design Exhibition that was held in the Musée des Arts Office buildings Décoratifs (French national museum of decorative arts) Transmit had a significant impact as it attracted more than 10,000 operating data visitors and was widely reported by the French media.
Send an optimum [Kansei-Japan Design Exhibition (Paris, December 2008)] energy-saving operation command Outdoor units Submit report
Indoor units Meteorological data of 850 divided locations in Japan. Source: Data by Company A
[Promotion of Agriculture-Commerce-Industry Collaboration] The New Economic Growth Strategy 2008, which was approved by the cabinet in September 2008, calls for the implementation of a variety of support measures to promote cooperation between agriculture, commerce, and industry. METI, in cooperation with the Ministry of Agriculture, Forestry and Fisheries, will continue to provide support to activities in the agriculture, forestry, and fisheries industries to take advantage of new technologies and business methods. For example, a production system called a “plant factory,” which enables automated, stable production of vegetables, is attracting attention as a new food production system with the potential to realize a stable supply of foods and industrialization of agriculture at the same time. [A plant factory installed within the METI office]
26 Section 3 Restructuring of global supply chains and merchandise strategy under worldwide recession It is of special importance to review and restructure the global supply chain and identify consumers on the basis of medium and long-term growth market analysis, especially when the world economy is slowing down. (How Asian production bases should be positioned) Despite the global recession, many companies think that Asia remains an important production base. On the other hand, the positions of individual countries and regions as production bases are beginning to differ. Companies are eager to expand production in Indonesia, where local demand is expected to be firm, in Thailand, where the automobile and other industries are heavily concentrated, and in Vietnam, where low-cost labor is available, and they also plan to maintain or expand current production levels in India and the coastal regions of China. On the other hand, a high rate of companies intend to reduce production or close production facilities in the Philippines, Taiwan, Singapore, and central-western China.
[Chart 2-42 Outlook for Production Bases Five Years Ahead] 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% ) 8 0
1 China (Pan-Bohai economic zone) 35.2% 54.6% 8.3% = ) n ( 6 2
1 China (Yangtze River Delta economic zone) 39.7% 54.8% = n ) ( 3 6 China (Pearl River Delta economic zone) 38.1% 47.6% 12.7% = n ( ) 9 2 China (Central-Western economic zone) 24.1% 58.6% 17.2% = n ( ) 5 2 South Korea 24.0% 60.0% 16.0% = n ( ) 2 3 Taiwan 15.6% 68.8% 9.4% 6.3% = n ( ) 7 1 Singapore 17.6% 64.7% 17.6% = n ( ) 0 9 Thailand 51.1% 43.3% = n ( ) 8 3 Malaysia 23.7% 60.5% 10.5% 5.3% = n ( ) ) 4 4 Indonesia 45.5% 38.6% 11.4% 4.5% = n ( ) 3 2 The Philippines 21.7% 52.2% 8.7% 17.4% = n ( ) 7 3 Vietnam 59.5% 37.8% = n ( ) 4 1 India 35.7% 50.0% 14.3% = n ( Expanding Maintaining the current level Reducing Withdrawing Source: Survey by METI (January 2009) (Change in the purpose of local production) Low-cost labor continues to be a reason for establishing a local production base. However, regarding China (the Yangtze delta economic zone), the purpose of local production has changed from utilization of low-cost labor to market development for the purpose of local sales, indicating the increasing priority on local markets. Although an increasing priority is being placed on local sales in Thailand, which is expected to expand as a production base, as well as in China, Thailand’s position as a base for exports to third-party nations is growing. [Chart 2-43 Changes in the Purpose of Advancing into Major Asian Production Bases] Thailand China (Yangtze River Delta economic zone) 0% 10% 20% 30% 40% 50% 60% 0% 10% 20% 30% 40% 50% 60% 50.0% 52.3% Low labor costs Low labor costs 47.3% 40.8% 9.6% 15.2% Local parts procurement Local parts procurement 11.0% 19.2% 7.4% 13.6% Local raw materials procurement Local raw materials procurement 11.0% 17.7% 31.9% 39.4% Market development for the purpose of local sales Market development for the purpose of local sales 44.0% 56.9%
16.0% 9.8% Utilization as an export base for third-party nations Utilization as an export base for third-party nations 27.5% 19.2%
36.2% 25.0% Voluntarily following a business partner advancing abroad Voluntarily following a business partner advancing abroad 23.1% 17.7%
14.9% 12.1% Responding to a request from a business partner Responding to a request from a business partner 3.3% 6.2%
0.0% Responding to an invitation from the government of the 3.8% Responding to an invitation from the government of the host country 0.0% host country 0.8%
1.1% 1.5% Securing of human resources with specialized skills Securing human resources with specialized skills 3.3% 1.5% 27 Source: Survey by METI (January 2009) (Reasons for the reduction and closure of overseas bases) Analysis of statistics concerning overseas production bases shows that reductions and closures of such bases for the purpose of consolidating overseas bases have rapidly increased since fiscal 2000. This suggests that the reorganization of production bases that had been established by the 1990s, a review of business resources, and strategic reorganization to take advantage of economic partnership agreements (EPAs) are increasing.
[Chart 2-44 Reasons for Downsizing or Closing Overseas Bases ] [Electrical machinery] [Transport equipment] 0% 20% 40% 60% 80% 100% 0% 20% 40% 60% 80% 100% ) ) 5 4 7 FY '98-'99 21.3% 16.0% 58.7% 2 FY '98-'99 20.8% 12.5% 66.7% = = n n ( ( ) ) 5 4 2 5 1 FY '00-'01 16.8% 16.8% 42.4% FY '00-'01 22.2% 1.9% 48.1% = = n n ( ( ) ) 9 1 3 3 1 FY '02-'03 14.4% 10.1% 9.4% 66.2% FY '02-'03 16.1% 19.4% 9.7% 54.8% = = n n ( ( ) ) 0 1 8 FY '04-'05 7.5%6.3% 68.8% 17.5% 4 FY '04-'05 4.9%4.9% 61.0% 29.3% = = n n ( ( ) ) 6 4 8 FY '06-'07 19.8% 3.5% 64.0% 12.8% 3 FY '06-'07 8.8% 70.6% 20.6% = = n n ( ( Mistaken estimate of product demand M istaken estimate of product demand Increased competition Increased competition Consolidation of bases Consolidation of bases Others Others
Remarks: “Electrical machinery” includes “information and communications equipment” Source: METI “Basic Survey of Overseas Business Activities” (Reorganization of international production systems) The development of EPAs in East Asia and Southeast Asia is expected to further promote the consolidation of Japanese companies’ overseas operating bases.
[Column: Development of EPAs and Reorganization of International Production Systems] Trade between countries that have signed EPAs already accounts for about 50% of overall trade within East Asia, and EPAs have contributed to efficient reorganization of production bases and sales networks (supply chains). Examples of consolidation of production bases due to South Korea-ASEAN signing of an EPA An agreement on trade in goods took effect in June 2007. South Korea-New Zealand China-ASEAN An agreement on the services sector An agreement on the start of Japan-South Korea negotiations was reached in March An agreement on trade in goods was signed in November 2007. Negotiations have been 2009 suspended since ○ As a result of early tariff took effect in July 2005. South Korea-Australia November 2004 An agreement on the services An agreement on the start of reduction under the India- sector took effect in July 2007. negotiations was reached in An agreement on investment was March 2009 reached in November 2008 Thailand EPA, production bases for TV sets and air Japan-India Japan-Vietnam Negotiations started in An agreement was signed conditioners in India have South Korea-India January 2007. An agreement was tentatively in December 2008. signed in February 2009. been integrated into those in Japan-Thailand Japan-Philippines An agreement took effect An agreement took in December 2008. Thailand. effect in November 2007 Japan-ASEAN An agreement took effect in December 2008. Japan-Australia India-New Zealand Japan-Malaysia Negotiations have continued An agreement on the start of An agreement took effect in since April 2007 negotiations was reached in ○ As a result of inter-regional July 2006. February 2009. Australia-New Japan-Singapore China-New Zealand Zealand tariff reduction for finished India-ASEAN An agreement took effect in November 2002. An agreement took An agreement took effect in October 2008 effect in 1983 An agreement on trade in goods A revised agreement took effect in September 2007. products due to the signing of was reached in August 2008. China-Australia Japan-Brunei Negotiations have AFTA, production bases for An agreement took effect in July 2008 continued since May 2005. flat-panel TV sets have been Japan-Indonesia concentrated in Singapore An agreement took effect in July 2008. 1 and Malaysia, while those for AFTA Australia-New washing machines and ASEAN free trade area An agreement took effect in 1993. Zealand-ASEAN An agreement was signed in refrigerators have been February 2009. concentrated in Thailand. Source: Compiled by METI 28 (Policy for selecting local business partners) Regarding the policy for selecting business partners in Asia, an overwhelming number of companies replied that they do not care whether a partner company is a Japanese company or not while taking into consideration factors such as delivery time and quality. However, automakers apparently put priority on doing business with Japanese companies.
[Chart 2-45 Policy for Selecting Partner Companies in Asia with Regard to Finished Products] 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% ) 3
5 Automobiles 22.6% 18.9% 56.6% = n ( )
3 Information and 1 7.7% 23.1% 69.2% =
n communications equipment ( )
5 Textile products such as 2 16.0% 12.0% 64.0% 8.0% =
n clothes ( )
9 Home electric
1 15.8% 10.5% 68.4% 5.3% =
n appliances/AV equipment ( ) 3
3 Industrial machinery 12.1% 72.7% 12.1% = n ( Placing top priority on doing business with domestic business partners Placing priority on doing business with Japanese companies Giving consideration to cost, delivery time, quality, etc. Placing priority on doing business with local companies Placing priority on doing Asian companies Source: Survey by METI (January 2009) Remarks: “Business partners” as referred to herein means companies to which the respondent entrusts a part of the operations concerning processing and materials. (Increasing priority on emerging markets) There is a clear trend of placing a priority on the middle class in emerging markets in the future, rather than on the wealthy. Despite the impact of the global financial crisis, the importance of emerging countries’ middle classes as a market is certain to be growing. Many companies replied that they will place priority on the middle class, rather than on the wealthy, as a target for sales of consumer goods such as automobiles, home electric appliances and audio/video equipment in emerging countries. This trend is growing particularly strong with regard to sales of home electric appliances and audio/video equipment in India. [Chart 2-46 Changes in Consumer Bases and Business Partners in Emerging Markets on which Priority is Placed]
0% 10% 20% 30% 40% 50% 60% 70% 0% 10% 20% 30% 40% 50% 60% 70%
43.6% 51.9% Wealthy Wealthy 27.7% 21.3% Automobile market Automobile market in China in India 32.1% 29.5% Middle class M iddle class 50.5% 52.8%
(n=156) Until now (n=178) Five years from now (n=81) Until now (n=101) Five years from now
0% 10% 20% 30% 40% 50% 60% 70% 0% 10% 20% 30% 40% 50% 60% 70%
45.3% 65.0% Wealthy Wealthy 27.8% Home electric 37.5% Home electric appliance/AV equipment appliance/AV equipment market in China 28.3% 15.0% market in India Middle class M iddle class 50.0% 50.0%
(n=53) Until now (n=54) Five years from now (n=20) Until now (n=24) Five years from now
Source: Survey by METI (January 2009)
29 (Business strategy concerning emerging markets) In emerging countries, to this point, Japanese companies have introduced similar products and services to those sold in Japan for sales to the wealthy. However, as they are now placing a priority on the middle class as a consumer base, they are shifting to a strategy of introducing products, technologies, and services tailored to local needs. On the other hand, the rate of companies reducing prices and costs has decreased, while the rate of companies introducing high-quality products and technologies with high value added and high quality increased, indicating the possibility that Japanese companies are not necessarily pursuing a strategy focusing on the middle-income group (called the “volume zone”) of emerging countries. [Chart 2-47 Changes in Business Strategies in Emerging Markets and Specific Examples] 0% 10% 20% 30% 40% 50% 0% 10% 20% 30% 40% 50%
38.7% 35.9% Price reduction/cost reduction Price reduction/cost reduction 28.9% 29.2%
Introduction of high value-added and high- 27.5% Introduction of high value-added and high- 28.7%
quality products and technologies 35.5% quality products and technologies 32.1%
Introduction of products, technologies, and 41.6% Introduction of products, technologies, and 38.4%
services similar to those sold in Japan 35.0% services similar to those sold in Japan 34.2%
Introduction of products, technologies, and 8.6% Introduction of products, technologies, and 13.5% services tailored to local needs 15.5% services tailored to local needs 17.6%
7.6% 8.9% India Building brands China Building brands 10.4% 8.6% (n=237) Until now (n=661) Until now
4.1% 7.2% (n=336) Five years Enhancement of after-sale services (n=760) Five years Enhancement of after-sale services from now 5.4% from now 6.5%
Source: Survey by METI (January 2009) [Column]: Expansion of the Middle-Income Group (Volume Zone) of Emerging Countries
In emerging countries, the population of households with income exceeding a certain level is expanding because of economic growth. In BRICs, over the five-year period from 2002 to 2007, the population with an annual disposable income of US$5,000 or more, calculated on the basis of the percentage of households with an income above that threshold, rose from 250 million to 630 million people, about five times as large as Japan’s entire population. As a result, BRICs has a very significant presence as a market. As the dissemination rates for durable goods in the BRICs countries, excluding color TV sets and refrigerators, are generally low, the market for such goods is expected to continue expanding. The room for market development is large in India in particular, as the dissemination rates for major durable goods such as motorbikes, passenger cars, refrigerators, and washing machines are low in the country. In emerging countries, there is also a growing need to develop social infrastructures such as electricity grids, waterworks, and railways. There are expectations that rather than merely supplying parts and materials, Japanese manufacturers will advance into such business areas and gain more business opportunities by combining products with services such as business management. Remarks: The above figures were calculated by multiplying the population by the percentage of households with an annual disposable income of 500 dollars or more Source: Compiled based on the JETRO “Trade White Paper on International Trade and Foreign Direct Investment” and the IMF “World Economic Outlook database” 30 (Japanese companies’ activities concerning emerging markets) There are movements to streamline the product functions required in local markets in light of the needs of the middle class in emerging countries, mainly with regard to home electric appliances. The challenge is how to accurately identify the local needs, reduce excess functions without undermining customer satisfaction, and realize low-cost production. Also necessary is a reform of the mindset of head offices in Japan, as represented by the easing of overly strict quality standards, for example. [Chart 2-48: Specific Examples of Activities by Individual Companies ]
Electric manufacturer A has started to Company B, which manufactures high-end, low-noise air manufacture products for emerging countries. conditioners for household and commercial use and Its products feature adaptation to unique local which enjoys a prestigious brand image, is selling models standards and specifications, proposals in the mid-price range with a lower noise-reduction tailored to local lifestyles, designs made with function, targeting the middle classes of Thailand and the local people in mind, and a reasonable other Southeast Asian countries, who appreciate the value for the price. The company has basic function of air conditioning more than the noise introduced microwave ovens, air conditioners, reduction function. The company is catching up with a washing machines, glass-tube TV sets, U.S. manufacturer that has a dominant share in the cordless telephones, and hair driers that are market for mid-price range models. suited to the characteristics of individual markets, targeting the middle-income group In China, Company D, an analytical/measurement instrument classes of emerging countries. manufacturer, is developing products tailored to local needs and trying to realize “100% local development and production,” Company C, a manufacturer of secondary materials including procurement of parts and materials. Although the that has a 40% share in the global market for company has a broad lineup of ultraviolet-visible materials used in luxury-brand products because of its spectrophotometers ranging from high-end models to general- outstanding product quality and technology, launched use models, and holds a market share of 40% in the foods a second brand targeted at emerging countries. sector in China, it faces intensifying competition with local Products under this new brand are developed so as to manufacturers that emphasize low prices. With regard to high- suit the characteristics and needs of individual target end models, the company is introducing Japanese-made markets and to meet their quality and strength products with a prestigious brand image, while aiming to double standards. The company is selling the products on a sales in the market for mid-range models by fully localizing trial basis in China, Vietnam, and Thailand for design, development and production and increasing local domestic consumptionp at lower pprices than the pprices procurementp to reduce costs byy 40% comparedp with Japanesep - of existing products. made products and enhancing price competitiveness. (Localization of planning and design functions) Most companies do not plan to localize their planning and design functions. On the other hand, many of the companies that plan such localization are developing products that meet the needs of the local markets where sales are planned. In order to target the middle class of emerging countries, it is necessary to actively incorporate local needs into product development in this way.
[Chart 2-49 Localization of Planning [[Column]:Column]: Establishment of a Product Style and Design Functions] DDesignesign Center in Shanghai by Sony
In China in 2005, Sony established the Shanghai These (n=347) Create Center, which specializes in product style Not planning functions are design. By localizing the product style design to localize already function in addition to the manufacturing and these localized planning/designing functions, the company is functions 19.9% developing products that meet the needs of the 60.8% Chinese and global markets, with a view to Planning to exporting Chinese-made products to countries localize these around the world. functions 19.3%
Source: Survey by METI (January 2009) Remarks: The above figures are based on the replies given by companies with production bases in Asia Photo: An LCD TV developed at the product style 31 design center in Shanghai (International management of human resources and the need for management localization) Japanese companies recognize that there is a strong need to localize the management of overseas production bases with regard to sales, personnel/labor affairs, procurement/purchasing, and manufacturing (plant managers). On the other hand, a relatively high ratio of Japanese companies replied that they will continue to have Japanese staff serve as managers regarding business management and design/R&D. Although the companies that recognized the need for localization are lagging in localization with regard to sales and design/ R&D, 80% have implemented localization with regard to other operations.
[Chart 2-50 Necessity for Localization of [Chart 2-51 Progress in Localization by Division] Management by Division] Remarks: Progress made by the companies that replied that localization is necessary with regard to individual divisions.
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% ) 9
Business management (top ) 7 12.1% 16.6% 21.4% 22.7% 27.2% 6 Business management (top 3 4 60.9% 19.6% 4.3% 6.5% 8.7% =
officer) = n
n offi c er ) ( ( ) ) 2 1 7
32.8% 35.2% 15.1% 10.8% 6.2% 2
3 Sales division
1 Sales division 34.7% 30.6% 17.4% 12.4% 5.0% = = n ( n ( ) 7 ) 6 12.5% 27.2% 25.3% 22.3% 12.5% 6
3 Design/R&D division 4 Design/R&D division 30.4% 19.6% 30.4% 15.2% 4.3% = = n n ( ( ) ) 5 Finance/accounting 9 7
24.0% 29.3% 25.6% 13.3% 7.7% 8 3 Finance/accounting division 64.0% 23.6% 6.7% 5.6% = = division n n ( ( ) ) 5 Personnel/labor affairs 8 Personnel/labor affairs 7 4 58.8% 27.7% 10.8%
3 40.0% 36.5% 13.3% 6.4%3.7% 1 = division = division n n ( ( ) ) 5 Procurement/purchasing 2 Procurement/purchasing 2 7 51.6% 25.4% 15.6% 5.7%
3 33.1% 42.9% 16.0% 5.9% 1 = division = division n n ( ( ) ) 0 5 Manufacturing division Manufacturing division (plant 2 7 50.8% 20.8% 13.3% 5.0% 10.0% 1
3 32.3% 41.3% 15.2% 6.7% 4.5% = = (plant manager) manager) n n ( (
Localization is necessary. Localization has been completed. Localization has made significant progress. Localization is desirable if possible. Localization has made some progress. Localization has not made much progress. Not clear whether or not localization is necessary. Do not recognize much of a necessity for localization. Localization has not made progress. Do not recognize a necessity of localization.
Source: Survey by METI (January 2009)
(Career background and authority of presidents of local subsidiaries) The need to appoint a local person as the president of a local subsidiary is deemed to be relatively weak given the necessity for frequent communications with the head office in Japan. The group of locals most often appointed as presidents of local subsidiaries are people who have experience studying or working in Japan, indicating Japanese companies’ tendency to prefer locals with experience in Japan for that post. The authority that is delegated to the president of a local subsidiary in the most cases is that for the formulation of a personnel plan at the local subsidiary and the formulation of a production plan. [Chart 2-52 Career Backgrounds of [Chart 2-53 Authority Delegated to Presidents Presidents of Local Subsidiaries] of Local Subsidiaries] 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
) Appointment of
(n=76) 2 Local managers 8 executives of the local 19.5% 14.6% 65.9% = n dispatched ( subsidiary
Local managers ) Decisions on personnel from local sites Others 10.5% 2 8 plans of the local 50.0% 36.6% 13.4% with experience =
7.9% n ( subsidiary
studying or )
Local managers 2 Lending/borrowing/loan working in 8 19.5% 25.6% 54.9% = guarantees hired locally in n Japan 34.2% ( )
mid-career 2 Profit 8 12.2% 22.0% 65.9% 7.9% = distribution/reinvestm ent n (
) Establishment of 1 8 subsidiaries/investment 9.9% 11.1% 79.0% = n Locally hired Local managers ( in other companies )
local managers at joint venture 0 Launch of new 8 12.5% 23.7% 63.7% = businesses 17.1% partners 22.4% n ( )
2 Purchasing/disposal of 8 13.4% 40.2% 46.3% = fixed assets n ( )
2 Decisions on production 8 51.2% 35.4% 13.4% = plans n ( Can be decided independently by the local subsidiary Partially delegated Source: Survey by METI (January 2009) Requires the approval of the head office in Japan 32 (Appointment of locals as plant managers) Many companies replied that it is desirable to appoint locals as plant managers, who are responsible for exerting leadership at the factory-floor level. Nearly 70% of the plant managers appointed from among local staff were those who were employed locally as new graduates or in mid-career, while only slightly above 20% were people who had experience studying or working in Japan. This indicates that it is essential to secure excellent human resources locally. The tasks to be performed for localization that were cited by the most companies were to ensure understanding of the concept of “zero defects” and quality control and Japan’s culture of manufacturing. This suggests that a higher priority is given to communicating Japan’s concept of manufacturing to the locals, than on passing on skills and techniques. [Chart 2-54 Career Backgrounds of Plant [Chart 2-55 Matters Concerning which Efforts Managers Appointed from Among Local Staff] Have Been Made to Facilitate the Localization of the Manufacturing Division] (n=160) Local plant (n=160) 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% managers hired Local plant in third- party Understanding of the concepts of “zero defects” managers at joint Others 1.3% 78.1% nations 1.3% and quality control venture partners 6.3% Locally hired local plant 69.4% managers 35.6% Local plant Enhancement of the ability to deal with managers with 48.1% problems in production lines experience studying or working in Japan 38.1% 22.5% Prevention of collusion with supplier 20.0% Local plant companies and local governments managers hired locally in mid- 16.9% career 33.1%
Implementation of measures against counterfeit 15.0% products Source: Survey by METI (January 2009) 1.9%
(Effects of appointing locals as plant managers) Among the effects of appointing locals as plant managers that were cited by many companies were those related to improvement in morale at the factory-floor level, such as facilitating smooth labor-employment relations, fostering mid-level employees qualified to serve in posts supervising other employees, and improving worker motivation.
[Column]: Localization of manufacturing at [Chart 2-56 Effects of the Appointment of Local Kanzaki MFG Co., Ltd. Personnel as Plant Managers] The effects of appointing local staff as plant mangers 0% 10% 20% 30% 40% 50% 60% 70% 80% Kanzaki MFG Co., Ltd., which manufacturers mold parts for plastic products, established a joint venture Facilitating smooth labor-management relations 72.3% in Thailand in 1988. Of the staff of about 450 at the joint venture, President Kanzaki is the only Japanese member. Locally employed Thais serve as the Fostering mid-level workers 47.2% managers of individual divisions. While the Japanese manufacturing industry’s approach is Improving worker motivation pursued thoroughly with regard to product quality 39.0% and delivery time, the Thai way is respected with Facilitating the OJT and kaizen (improvement) regard to management at the factory-floor level. 27.7% activities
Reducing the worker turnover rate 21.4%
Helping to employ excellent workers 17.0%
Others 4.4% (n=159)
33 Source: Survey by METI (January 2009) (Utilization of foreign nationals as personnel) The number of foreign nationals with specialized skills who work in Japan is still small. However, about 15% of SMEs employ or plan to employ foreign nationals with specialized skills and 20- 30% of large companies employ or plan to employ such foreign nationals. As for the policy for future treatment of foreign employees, large companies tend toward planning to appoint them as senior officials at foreign business sites in their home countries, while SMEs tend toward planning to treat them as part of the domestic workforce in Japan. [Chart 2-57 Presence or Absence of Foreign Nationals with Specialized Skills at Japanese Business Sites] 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% ) p - 9 i s l y 6 h r a s 5 r o n l 1
t 5.2% 9.4% 85.3% e SMEs o e c = d i v t a n a f ( e a e l l e N r h a ) o t n 8 o t g g l i a 8 n f Large i e 2 e r 9.4% 12.5% 78.1% y l = o a
o companies n l F r ( p s l ) l 9 i s l 5 k e a s 5 h n D 1 t d SMEs 5.3% 9.8% 84.9% s o = e i & n n t z n i i ( o R a l i / g s a N n i i n g i ) c n v i i k e 5 g s r i d p 8 e Large o e s 2 d r 14.7% 14.7% 70.5% w = h o
t companies n F i ( w s l ) l n i 1 s o l k 6 i e a t s 5 a h n 1 r t d SMEs 6.4% 10.6% 83.0% s o t e = i s n n t z i n i i o a ( n l i i g s a N i i n m i ) c n v i d k e 2 g r a i d p 8
/ Large o e s s 2 r 18.4% 11.0% 70.6% e w = h o l
t companies n F a i ( s w Employing such foreign nationals Not employing such foreign nationals (planning to employ such workers in the future) Not employing such workers (not planning to employ such workers in the future) [Chart 2-58 Future Treatment of Foreign Nationals Playing a Leadership Role at the Factory-Floor Level] 0% 10% 20% 30% 40% 50% 60% 70% 80%
To be appointed as senior officials at business sites in their home 38.0% countries 66.7%. % To be appointed as senior officials responsible for expanding foreign 12.7% business operations 12.5% 54.9% To be treated as part of the domestic workforce in Japan 29.2% 2.8% Others 8.3% (n=71) SMES (n=24) Large companies Source: Survey by METI (January 2009) [Column]: Career Development Program for Foreign Students in Japan
Among the programs intended to develop human resources capable of strengthening the competitiveness of Japan’s manufacturing industry and promoting its internationalization is the “Career Development Program for Foreign Students in Japan,” which provides excellent foreign students in Japan who are willing to work in Japan or for Japanese companies with comprehensive support, including language training in business Japanese, education about Japanese business practices, professional education provided through industry-academia cooperation (in areas such as manufacturing and IT) and employment support. (This program has been implemented by METI and MEXT since fiscal 2007.) Under this program, more than 100 universities and more than 800 companies have formed 30 consortiums across Japan and implemented human resource development programs for more than 1,300 excellent foreign students staying in Japan, so as to enable them to find jobs at Japanese companies (fiscal 2008). In expanding its business globally, NIDEC Servo Corporation (based in Kiryu, Gunma Prefecture), which has production bases in China, Indonesia, and Vietnam, felt a need to foster personnel capable of acting as the leaders of local operations who understand not only Japanese production methods, management style, and technologies but also the culture of Japan’s manufacturing. Therefore, the company has joined a program implemented by Gunma University (Kiryu, Gunma Prefecture) to foster excellent engineers capable of working globally, and has made active contributions to the program, including dispatching lecturers to provide lessons. The results have led the company to employ highly-motivated Vietnamese students with excellent skills. This program will continue to attract more and more attention, as it fosters advanced human resources that are strongly committed to manufacturing, have in-depth understanding of Japanese corporate Source: A lesson provided through industry-academia culture, and are capable of supporting the development of Japan’s cooperation (Nagoya Institute of Technology) manufacturing. 34
