Japan to offer subsidies to companies shifting base from China to Bangladesh

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 program aimed at diversifying the country's supply chains.

The Japanese government has allocated $221 in its 2020 supplemental budget as subsidy to encourage companies to disperse and shift to Bangladesh and across the ASEAN region, reports Nikkei Asian Review.

By expanding the scope of the subsidy programme, Japan aims to reduce its dependence on a particular region and build a system for stable supply of medical or electronic equipment even during an emergency.

When the Ministry of Economy, Trade and Industry of Japan 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 programs. The total amount granted is expected to run into the tens of millions of dollars.

The program 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.