Japan adds Bangladesh and India to 'China exit' subsidy destinations

Japanese manufacturers will now be eligible for subsidies if they shift production out of China to India or Bangladesh, in an expansion of a government programme aimed at diversifying the country's supply chains, Nikkei Asian Review reports.

Japan's supplementary budget for fiscal 2020 earmarked 23.5 billion yen ($221 million) for companies that move production to Southeast Asian nations. When the Ministry of Economy, Trade and Industry opened up a second round of applications on Thursday, it added "projects that contribute to the resilience of the Japan-ASEAN supply chain" to the list of qualifying moves, eyeing relocations to countries such as India and Bangladesh.

Manufacturers can receive subsidies for feasibility studies and pilot programmes. The total amount granted is expected to run into the tens of millions of dollars, according to the Nikkei report.

The programme aims to reduce Japan's reliance on a handful of links in its supply chains, particularly China, and ensure a steady flow of such products as medical supplies and electrical components in an emergency. This issue came to the forefront with China's shutdown in the early days of the pandemic.

The first round of subsidies announced in July granted more than 10 billion yen to 30 companies relocating manufacturing to Southeast Asia, such as Hoya, which is moving production of electronic components to Vietnam and Laos. Another 57 are receiving support for shifting production facilities to Japan.

Meanwhile, Indian Prime Minister Narendra Modi on Thursday proposed reshaping global supply chains based on trust and stability, and not just cost benefits, as the country eyes new logistics networks that are less dependent on China.

Modi's statement also follows a decision Tuesday by trade ministers from Japan, India and Australia to begin building a resilient supply chain in the Indo-Pacific region. Aiming to reduce trade dependence on China -- which was exposed when the coronavirus outbreak halted the flow of major goods across Asia -- the three countries stressed the need for a free, fair and predictable trade environment and urged like-minded nations in the region to participate.