March 27, 2013 8:43 pm

Manufacturing: Countless efforts fail to produce employment

In the northwestern provincial city of Komatsu, a vast factory that once produced metal stamping presses has been transformed into a lush park, complete with cherry trees, 300 varieties of plants, a children’s pavilion and a technology training centre.

Komatsu-no-Mori, as the site has been renamed, was built by Komatsu, the maker of construction and industrial machinery, in its home town, to mark its 90th anniversary in May, 2011.

The park and training centre are Komatsu’s answer to a problem that has afflicted Japan over the past 20 years – the closure of manufacturing sites and the disappearance of jobs they once offered local communities.

All over the country, production sites that churned out everything from flat screen televisions to lipstick have been closing their doors, forcing workers to leave their hometowns in search of work and exacerbating the steady decline of regional economies.

The number of people working in manufacturing in December fell below 10m for the first time since 1961. Although that figure rose to 10.2m in January, it is still down 35 per cent from about 15.7m in 1992, according to government statistics.

This year, Shiseido, the cosmetics group, said it would close its factory in Kamakura after more than 50 years and shift some production to Vietnam, where facilities will be expanded.

At the end of this month, Sony will close its Minokamo manufacturing site, in Gifu prefecture in central Japan, where it once employed as many as 2,400 workers manufacturing interchangeable lenses for digital cameras.

Regional governments have been at pains to attract employers and create much-needed jobs but they are up against a relentless shift of manufacturing to growth markets, particularly elsewhere in Asia.

The downturn of the electronics industry has hit Izumi city, on the southwestern island of Kyushu, hard.

In 1969, Panasonic, NEC and Fujitsu all came to Kyushu, which attracted investment as “Silicon Island”, recalls an official at the Izumi city municipal office. “Those were the good days, but now emerging economies are becoming the place for manufacturers to go,” he says.

Izumi city suffered a two hits in 2009, when Pioneer and NEC closed their plants with the loss of 1,000 jobs. “It was a huge jolt to lose 1,000 jobs in a city of 52,000,” says the official, who declined to be named because of the sensitivity of the issue.

Izumi is offering to waive taxes for 10 years to manufacturers, IT companies, call-centre operators and food processing factories alike, and three of its officials have been scouring the country in search of potential investors.

But “there aren’t any candidates. Even attracting a vegetable processing plant that employs five people is a big challenge”, the official says.

“Factories throughout Japan are closing and Kagoshima is now focusing on keeping the factories that remain. Companies say the strength of the yen is the main obstacle to building a plant in Izumi. They say that rather than set up in a corner of Japan where the transport links are not that great, they would rather build a plant in an emerging economy.”

Some regional cities have been more successful in replacing lost jobs by looking to businesses other than manufacturing.

Kainan is a small city of 55,000 in the southwestern prefecture of Wakayama that makes 60 per cent of the kitchen brushes sold in Japan.

The city spent Y3.2bn 15 years ago, buying a factory site that covered 33,000 square metres. It sold part of the property and set aside 20,000 sq m as retail space, after taking a survey of local residents that indicated they wanted more shops in the neighbourhood.

“Ever since a supermarket in the city centre closed, people found it very difficult to meet their daily shopping needs,” says Yohei Yamabe, project general manager, at Kainan city’s office.

A local supermarket operator, Okuwa, won the public bid to lease the space, with a plan to invest Y2.1bn ($22.3m) and employ about 200 people, which is more than the 140 or so that the former factory employed.

Komatsu city expects the new park and technology training centre, built and owned by the maker of diggers and dump trucks, to generate revenues for the local community of Y1.2bn.

But such positive examples are far outnumbered by the countless failed attempts to find new sources of jobs that have been lost as a result of the hollowing out of manufacturing.

The consensus is that the government needs to do more to encourage more foreign direct investment, a shift in Japan’s industrial structure and the emergence of new ventures.

“There are said to be about 50 vegetable processing companies in Japan and I think there is a possibility that there will be more in future,” says Kazuyuki Sudo, president of Yasaikobo.

“But I don’t think that number will increase to 1,000,” he says.

Copyright The Financial Times Limited 2015. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.

SHARE THIS QUOTE