Why Japan is offering Incentives to Companies shifting Base from China to India? - Details

Japanese manufacturers can now apply for subsidies if they shift their base from China to India or Bangladesh. This move is a part of a government programme that is aimed at diversifying and improving the country’s supply chain. 

By expanding the scope of this programme, Japan will also manage to reduce its dependency on any country and building stable relationships would enhance bilateral trade. The system will be able to also obtain a stable supply of medical materials and electronic components especially during times of emergencies. 

The Japanese government has allocated around 23.5 billion yen in 2020 fin order to encourage companies to shift and diversify their manufacturing units across ASEAN region. 

It is also important to note that Japan is currently heavily dependent on China. The move might be taken also because China had cut off their supplies during COVID-19 pandemic. 

The first round of applications were submitted by 30 manufacturing projects that were approved by the govt. This included Hoya's manufacturing of electronic components project in Vietnam and Laos, and provided subsidies of 10 billion yen.

“In conjunction with the second round of applications which began on September 3, projects that will contribute to the resilience of the ASEAN-Japan supply chain were added to the list, assuming relocation plans to India and Bangladesh,” Livemint reported. 

According to Nikei Asian Review, “the second round of application targets feasibility studies on decentralising manufacturing sites, the experimental introduction of facilities and implementation of model projects. The total amount of subsidies which will be provided is reported to reach several billion yen”