Japan Inc steps up shift overseas as yen stays high

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Mar 5, 2010
Japan's big manufacturers led by Panasonic Corp and Nissan Motor Co Ltd are speeding up their shift overseas, in a sign corporate Japan sees the strong yen as a long-term handicap rather than a temporary blip.

A sluggish home market and energy shortages following the widespread nuclear power shutdown sparked by the March 11 earthquake and ensuing atomic crisis are also tipping the balance toward investment abroad.

Panasonic is planning its first solar factory outside Japan, sources said on Friday, while Suzuki Motor Corp said it was seeking to double auto production at its joint venture in China by 2015.

Rival automakers Toyota Motor Corp and Nissan also said on Thursday that exchange rates were forcing them to consider changes in their own production plans.

"I think we are reaching the limit for manufacturing in Japan," said Yuuki Sakurai, president of Fukoku Asset Management in Tokyo.

"In future, companies may be registered in Japan and have their head office here, but it could be that most people they employ are not Japanese and most of their production doesn't take place in Japan."

The Japanese currency was trading at about 77 yen to the dollar on Friday, compared with levels around 90 yen two years ago.

The euro has tumbled to about 104 yen, compared with about 134 yen in November 2009, slashing the value of overseas revenues brought home to Japan by export-reliant firms. Manufacturers say there is little prospect of increasing procurement in euros to offset the pain.

Panasonic, for example, has said the strong yen will cut annual operating profit by 28 billion yen ($363 million) this year.

Panasonic's new solar plant in Malaysia is set to cost 40-50 billion yen, according to sources, with news of the investment coming just weeks after the firm revealed it was dropping a plan to convert a TV panel plant in Japan for solar panel production.

Shares in Panasonic fell 0.9 percent to 686 yen on Friday, compared with a 1.2 percent fall in the Nikkei average.

"We were considering increasing solar production capacity by converting our No. 3 panel plant," Panasonic President Fumio Ohtsubo told a news conference last month.

"But there was no reason for an aggressive expansion at this plant, given that the exchange rate situation is completely different from two years ago, and that we have grave concerns about power shortages," he added. "All things considered, there is more merit to manufacturing overseas than in Japan."