Japan to invest in quake-struck auto-parts industry -- The state-backed Development Bank of Japan is setting up a fund that could be as large as $619m to help the country's auto-parts industry to recover from the March 11 earthquake and tsunami.
Disruption to the auto supply chain caused the country's biggest disaster since the second world war has underscored just how important Japanese auto-parts makers are to domestic and global vehicle manufacturers, from General Motors to Toyota.
The plan is for the fund to invest in some of the 20,000 or so companies involved in the auto supply chain to bolster their capital, a person familiar with the plan said. It is not yet clear when the fund will start investing, and could initially be as small as Y5bn ($62m) as it gets going, the person says.
The DBJ is planning to work with the Japan Auto Parts Industries Association to create the fund.
The investments are not only aimed at helping companies to repair damage to existing plants and equipment, but also new technology, such as cloud computing, to back up existing production systems to mitigate disruption to production should other disasters occur, according to the person.
The fund's success could also be a way to help keep a certain level of auto-parts production in Japan, the person said, adding that a mixture of strategies including free-trade agreements are also needed.
Questions are being asked in Japan about whether the disaster will expedite a shift overseas. Many large and even midsized auto-parts makers already have overseas operations, and there is a worry this could grow given that domestic demand is limited, the impact of a stronger yen and higher energy costs.
However, cost cutting has its limits and the disaster has only intensified worries it could prompt some companies to shift production even more quickly to countries with cheaper costs and less exposure to risks of natural disasters.
The DBJ is planning to work with the Japan Auto Parts Industries Association to create the fund, while it is possible major auto and auto-parts groups and their main banks could also become involved, the person said. The fund may also provide loans, but the immediate concern is the provision of capital, the person said.
Although the quake and tsunami hit just a few weeks before the end of the fiscal year on March 31, automakers still suffered a sharp decline in profits.
The added uncertainty of electricity supply in the Kanto region, which accounts for 38 per cent of the economy and where Tokyo is based, due to the nuclear crisis at Tokyo Electric Power, prompted many Japanese companies to forgo giving earnings forecasts for this fiscal year.
While many component plants affected by the disaster are believed to be up and running again they have yet to return to full capacity and automakers' production has yet to return to normal levels. ( cnn.com )
Disruption to the auto supply chain caused the country's biggest disaster since the second world war has underscored just how important Japanese auto-parts makers are to domestic and global vehicle manufacturers, from General Motors to Toyota.
The plan is for the fund to invest in some of the 20,000 or so companies involved in the auto supply chain to bolster their capital, a person familiar with the plan said. It is not yet clear when the fund will start investing, and could initially be as small as Y5bn ($62m) as it gets going, the person says.
The DBJ is planning to work with the Japan Auto Parts Industries Association to create the fund.
The investments are not only aimed at helping companies to repair damage to existing plants and equipment, but also new technology, such as cloud computing, to back up existing production systems to mitigate disruption to production should other disasters occur, according to the person.
The fund's success could also be a way to help keep a certain level of auto-parts production in Japan, the person said, adding that a mixture of strategies including free-trade agreements are also needed.
Questions are being asked in Japan about whether the disaster will expedite a shift overseas. Many large and even midsized auto-parts makers already have overseas operations, and there is a worry this could grow given that domestic demand is limited, the impact of a stronger yen and higher energy costs.
However, cost cutting has its limits and the disaster has only intensified worries it could prompt some companies to shift production even more quickly to countries with cheaper costs and less exposure to risks of natural disasters.
The DBJ is planning to work with the Japan Auto Parts Industries Association to create the fund, while it is possible major auto and auto-parts groups and their main banks could also become involved, the person said. The fund may also provide loans, but the immediate concern is the provision of capital, the person said.
Although the quake and tsunami hit just a few weeks before the end of the fiscal year on March 31, automakers still suffered a sharp decline in profits.
The added uncertainty of electricity supply in the Kanto region, which accounts for 38 per cent of the economy and where Tokyo is based, due to the nuclear crisis at Tokyo Electric Power, prompted many Japanese companies to forgo giving earnings forecasts for this fiscal year.
While many component plants affected by the disaster are believed to be up and running again they have yet to return to full capacity and automakers' production has yet to return to normal levels. ( cnn.com )
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