Japan's government will spend a total of 70 billion yen (S$908 million) to subsidise a group of Japanese companies to shift manufacturing out of China to Southeast Asia or Japan.

According to Nikkei Asian Review, the move was done to reduce Japan's reliance on China, and to build resilient supply chains.

Japan faced difficulty in sourcing face masks during Covid-19 outbreak early stages

Nikkei Asian Review reported that that the Japanese government earmarked 220 billion yen (S$2.85 billion) in the fiscal 2020 supplementary budget to subsidise companies to move plants to Japan.

Of that amount, 23.5 billion yen was allocated to promote the shifting of production sites from China to Southeast Asia.

A total of 57 of these projects will head to Japan, while 30 of them will shift production to various countries in Southeast Asia, including Vietnam, Laos and Malaysia.

According to Bloomberg, while China is normally Japan's biggest trading partner, the Covid-19 outbreak has damaged economic ties between the two countries.

In particular, China's image in Japan has deteriorated due to the virus, despite Japanese Prime Minister Shinzo Abe's long-term efforts to improve relations with China over the last few years.

Japan also experienced difficulties in sourcing essential items such as masks earlier on in the year, with many of these items coming from China.

Asian Nikkei Review reported that certain Japanese companies receiving the subsidy, such as household goods maker Iris Ohyama, will now begin producing face masks in Miyagi Prefecture in northern Japan, with all materials prepared locally and independent of overseas suppliers.

Currently, the company produces face masks at factories located in various Chinese cities, with non-woven fabric and other materials sourced from other Chinese companies.

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