Canon looks to return manufacturing to Japan

Business In Other News - February 3rd, 2014

Canon Inc, Japanese camera and office equipment maker, will tread familiar ground as the weak yen is expected to shore up domestic production.

While many Japanese companies continue to find an overseas route to cheap manufacturing, Canon took it upon themselves to take the road less traveled and move some of its production back to its home country.

On Wednesday, the world’s largest camera maker reported a net profit increase of 5 percent in its last financial quarter. Now, with the yen projected to remain weak for some time, Canon is keen on going back to its roots.

“There are two reasons behind our decision to shift a part of our production back to Japan,” said Canon Chief Financial Officer Toshizo Tanaka at a news conference.

“Abenomics is working well…thus leading us to believe the foreign currency rate won’t fluctuate widely from the current levels at least for the next several years,” Tanaka said.

The gap between labor costs in Japan and other Asian nations has also narrowed. With rising wages outside Japan, Canon plans to introduce robots to the production line at home and reduce labor costs.

Canon generates about 80 percent of its revenues outside Japan. The planned shift is expected to increase domestic output by 50 percent by 2015, from 43 percent in the latest business year ended December.

“Our overseas production ratio is too high,” Chairman and CEO Fujio Mitarai said. “And we must bring back more production to Japan.”

The move could change the landscape of Japan’s manufacturing sector, the Wall Street Journal reports.

Daisuke Nakano, a partner at the consulting firm Roland Berger in Tokyo, said many Japanese companies are likely to follow Canon’s footsteps and shift more production back to Japan.

He said he felt many Japanese firms were starting to make “well-balanced” decisions about production facilities at home and abroad.

By Maesie Bertumen

Image: SmithGreg/Flickr