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With the shockwaves from China's COVID-19 gift to the world the Japanese council on investment for the future has aims to break supply chain dependence on China with drastic measures.

Japan Council of the Future

Image: On September 19, 2019, Prime Minister Shinzo Abe held the 30th meeting of the Council on Investments for the Future at the Prime Minister’s Office.

The government panel said Thursday it will consider ways to promote manufacturers’ domestic production as part of an effort to protect the country’s economy from the impact of the novel coronavirus outbreak.

The council on investment for the future is chaired by Prime Minister Shinzo Abe has a plan to take drastic measures to help the country’s tourism industry recover from the virus after the crisis settles down.

The Bank of Japan on Wednesday followed up the earlier emergency statement by Governor Haruhiko Kuroda saying the BOJ will buy 500bn yen of JGBs in an unscheduled repo operation, an unexpected liquidity boost. Kuroda’s comments were made in an emergency statement just days after a similar move by Federal Reserve Chair Jerome Powell are a signal the world’s biggest central banks were mustering a coordinated response to the crisis.

The Japan Times said the government may compile a supplementary budget for fiscal 2020 to finance such measures, sources familiar with the matter said. Supply chain disruptions in China, such as those from the coronavirus outbreak, hit hard Japanese manufacturers that are highly dependent on supplies from the country.

China Global Supply Chain

The future investment council will consider encouraging Japanese manufacturers to source more from Southeast Asia and bring home production of highly profitable products such as some auto parts. For the tourism industry, the council affirmed a plan to introduce a national campaign, with support from both public and private sectors, to revive demand for travel.

Some sectors will face more acute shortages than others based on how dependent they are on China. Japan’s electrical equipment manufacturing industry imports $96.6 billion worth of parts and components, or intermediate goods, that go into final products. Of that, 5.6% comes from China. It’s a similar picture for machinery manufacturers. A recent analysis by Nomura Holdings Inc. shows that these industries will face larger production bottlenecks, hampering their ability to supply and sell machinery. That will have an impact on the hundreds of factories that rely on their equipment.- Bloomberg

The council also agreed to establish a subcommittee to consider a medium- and long-term energy strategy that will take into account challenges from climate change as well as improved energy-efficient technology.

Source: Japan Times

From The Traderscommunity News Desk

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