Global Businesses Exit Japan

      March 12, 2010 07:35

      Global businesses are packing up and exiting the Japanese market, which has been hit by the recession compounded by dwindling demand due to a low birthrate and an aging population. The exodus has sounded alarm bells not only in the manufacturing and financial service industries but even in cutting-edge sectors such as fuel cells.

      French tire manufacturer Michelin has decided to shut down its production plant in Ota, Gunma Prefecture in July. The branch opened in 1974 and has produced mainly high-quality tires, but declining profitability led to the closure decision. Michelin began streamlining global operations in 2007 and is building the world's largest production plant in Shenyang, China capable of manufacturing 12 billion tires annually. It also plans to build a factory in southern India that will make tires for buses and trucks.

      Canadian company Ballard Power Systems also decided to pull out of Japan, where it had a joint venture with Japanese company Ebara to tap into the household fuel cell market. Instead, Ballard in January invested in a Danish telecommunications equipment maker and reportedly has no plans to do more business in Japan.

      U.S. media company Liberty Global in February sold its stake in Japanese cable station Jupiter Telecommunications to a Japanese company for around 360 billion yen. Liberty used the money to acquire a German cable TV company for 3.5 billion euros.

      The exodus is evident in the capital market as well. After peaking at 127 in 1991, the number of foreign companies listed on the Japanese bourse has been steadily declining, falling to 34 in 2002 and 19 in 2008. Now, there are only 15 left. Swiss bank UBS has decided to delist its shares from the Japanese stock market in April, and the trend is expected to continue.

      The reasons behind the exodus are the growing opportunities in emerging economies such as Brazil, China and India following the global financial crisis and the shrinking market size of Japan due to its prolonged economic slump.

      Last year, the amount of foreign capital that entered Japan fell 55.7 percent compared to 2008. According to the Bank of Japan, the country's economy is suffering from a chronic shortage of demand of about 30 trillion yen. The financial daily Nihon Keizai Shimbun reported that the decline in Japan's potential economic growth rate is making the country less and less attractive to foreign businesses.

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