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An increasingly large proportion of Japanese subsidiaries based abroad


Japanese manufacturers are relying more and more on the activities of their overseas-based subsidiaries as sources of opportunities. Sales by manufacturing companies, realised by these subsidiaries, stood at 38.8 trillion JPY (299.7 billion US dollars) in the 2nd quarter of 2022, a record. This represented 28% of the total sales by Japanese manufacturing companies, when we add the sales by subsidiaries abroad to those of companies located in Japan. This percentage is also a new historic high. The main “expatriation” sector by far remains the transport equipment sector (53.6% of the sector’s total sales are realised abroad), an industry that is strongly embedded in global production chains.

Japan: manufacturing overseas subsidiary sales ratio

Growing geopolitical tensions in Asia (the main anchor point for Japanese companies), as well as logistics problems around the world, have prompted the Japanese authorities to unblock several fiscal packages in order to encourage the repatriation of certain activities1. The current weakening of the yen could be another incentivising factor.

While further relocations are possible, a reversal of the trend seems difficult to envisage. Manufacturers based in Japan face very significant structural constraints (low domestic demand, reduced labour supply) which are unlikely to ease.

1 See BNP Paribas Ecoflash Japan: Foreign subsidiaries, a key driver of Japanese industry, 8 June 2022

Guillaume DERRIEN
Team : OECD economies