Japanese companies, looking for backup operations in case of another set of disasters or safety from wild currency swings, may consider building more plants in the United States, that country's consul-general for the Midwest said.
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Factory facilities are damaged in an industrial complex in Sendai, northern Japan, Saturday, March 12, 2011, in this file photo.CLEVELAND, Ohio -- Japanese companies may consider building more plants in the United States for backup operations after being hit with a set of natural disasaters last spring, said the country's consul general for the Midwest.
"A lot of Japanese companies have started thinking again about the importance of diversification," Kuninori "Matz" Matsuda said Thursday at a meeting with reporters and editors from The Plain Dealer.
Japan's industrial output ground to a half this spring following earthquakes and a tsunami that ravaged the island nation in March. Automakers Toyota and Honda posted major sales declines this summer after they couldn't get cars from Japan or critical parts to make vehicles in its U.S. and Canadian plants.
Matsuda said manufacturers have mostly recovered from the disasters. He expects the country to be close to its full export capacity by the end of this month. But he added that he still expects companies to consider moving some production to this country.
While Japanese companies have been rebuilding their plants, economic uncertainty in Europe and the United States has depressed the dollar and euro. As a result, the Japanese yen has moved up. In recent months, the yen has traded between 70 and 80 per $1, a significant increase in value from 90-100 yen-per-$1 range of last year.
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Kuninori Matsuda, consul-general of Japan in DetroitAs the yen increases in value, U.S.-made products get cheaper in Japan, but Japanese-made products are more expensive to sell over here. Matsuda said making products in this country eliminates that disparity.
"There's a risk [to Japan] of sending a significant amount of production" out of the country, Matsuda said. "For the shear survival of the Japanese companies, some movement out of Japan has to take place."
He pointed to recent announcements last month by Honda to build a new plant in Mexico and expand its Marysville, Ohio plant with a $355 million investment.
Matsuda acknowledged that there's some political pressure in Japan for the government to get involved in lowering the value of the country's currency to make Japanese-made products more competitive. But he said most officials in the country's government don't want to interfere with valuations. Such efforts have backfired in the past, he said.
Also, he added, it's unclear that there's much the government or Japan's central banks can do. The falling values of the dollar and euro stem from concerns over stagnant economic growth or possible recessions - issues that couldn't be solved by devaluing the yen.
"We are much more concerned about the overall economic situation in Europe and the United States" than in currency, Matsuda said.
Despite those economic concerns, he said the U.S. remains a good place for Japanese companies to build facilities.
