Home Asia News Made in Japan: Upswing for Japanese companies

Made in Japan: Upswing for Japanese companies

"Made in Japan" - megatrend among tourists. Source: Surachet Jo/Shutterstock.com

Japanese companies in the consumer goods sector are experiencing an upswing thanks to increasing international popularity. Recognizing the trend, Japanese companies are increasingly investing in factories in their own country and shipping their products to where the demand is.

The Japanese economy – trapped in a deep recession for many years – is experiencing a new boom. Since the start of Prime Minister Abe’s most recent term in office, a silver lining has been emerging on the horizon. Fund managers like Invesco’s Daiji Ozawa also see many positive signs for Japanese equities and Japanese funds.

Cosmetics as a new seal of quality

“Made in Japan” is already a seal of quality, especially in Asia. Tourists – in 2017 the figure was 28.69 million, the fifth record year in a row – are particularly fond of Japanese beauty products. Of the ¥1.64tn invested in purchases, 40 percent was for cosmetics and daily consumer goods.

Japanese companies are therefore focusing on changing their strategy and increasing their domestic production. The internationally renowned cosmetics manufacturer Shiseido will spend ¥140bn ($1.23bn) by 2022 to expand its domestic production capacity. This is an increase of ¥45bn over previous spending plans by 2020. The plans include expanding the Kakegawa plant southwest of Tokyo and cancelling the planned closure of a factory in Osaka.

Shiseido is also planning to open new Japanese plants for the first time in over three decades – north of Tokyo in 2019 and in a suburb of Osaka the following year. However, since production capacity is likely to be below demand, additional investments are planned. This is expected to increase global capacity by 80 percent. Competitor Kose with its Albion skin care unit is also planning a ¥10bn-upgrade to a plant in the Tokyo area by 2020.

Shiseido and Kose’s major investments show how health and beauty products – traditionally more geared to the domestic market – are now emerging as the new face of “Made in Japan” behind the export-oriented automotive industry.

Japanese companies: Slump in profits in the automotive industry

While the cosmetics industry is looking to the future with optimism, the trade war between the USA and China is taking its toll on other industries. Half of the major Japanese companies lagged behind the market’s earnings forecasts for April-September. According to Nikkei*, the combined net profit of Japanese companies that had published their results by 2 November 2018 rose by only 0.5 percent for the July-September quarter. Previously, it had risen at double-digit rates for seven consecutive quarters. For the first six months to September, earnings growth was only 5 percent, compared with 23 percent the previous year.

The Japanese automotive industry is also feeling the effects of the trade war. Six out of eight companies in the Toyota Motor Group reported a decline in net profit. US sanctions against China and higher tariffs on steel and aluminium depressed annual operating profits by about ¥7bn at Toyota Industries and about ¥5bn at Denso.

Electronics group Sony, on the other hand, enjoyed more robust earnings. For the first half of April-September, the Group recorded an increase in net profit of approximately 90 percent, raising its full-year guidance by approximately ¥200bn.

* Accumulated results of 641 companies, with annual financial statements in March