Summary of the White Paper on Manufacturing Industries (Monodzukuri) 2009 May 2009 Ministry of Economy, Trade and Industry Ministry of Health, Labour and Welfare Ministry of Education, Culture, Sports, Science and Technology <Table of Contents> 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 programs Part 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 1.31 3 -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 (Year) 200 - 80 0 0 0 0 0 0 0 0 0 0 0 0 - 10 0 8 8 8 8 7 7 7 7 6 6 6 6 / / / / / / / / / / / / 1 0 0 0 1 0 0 0 1 0 0 100 0 0 7 4 1 0 7 4 1 0 7 4 - 15 1 (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.