Analysis: Abenomics speeds corporate investment, but not in Japan

Wed Sep 25, 2013 7:47pm EDT
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By Wayne Arnold and Orathai Sriring

HONG KONG/BANGKOK (Reuters) - Japanese Prime Minister Shinzo Abe got an early sign of how his blueprint to revive Japan's industrial vim and economic vigor was working when two of his country's biggest car makers unveiled $900 million worth of investments to boost production.

There was one drawback: the new assembly plants and expanded factories announced by Mazda Motor Corp (7261.T: Quote) and Honda Motor Co Ltd (7267.T: Quote) are not in Japan, but more than 2,000 miles away, in Thailand.

Since taking office last December, Abe's stimulus efforts have barely dented a slide in private-sector investment at home, but they have done wonders for accelerating Japanese investment elsewhere in Asia.

Capital expenditures in Japan fell 4 percent in the first six months of this year, compared with the same period of 2012. Japanese investment in Asia, meanwhile, rose 22 percent, according to the Japan External Trade Organization, or Jetro.

"Manufacturing investment is still contracting because companies are investing abroad," said Izumi Devalier, Japan economist at HSBC in Hong Kong.

Government spending and a weaker yen can't conceal that Japan's manufacturers are still forsaking their country's shrinking population, high costs and regulatory barriers in favor of faster-growing, younger economies in Asia.

The prospect of a weakening yen - the currency has fallen roughly 20 percent against the dollar since December - sapping their purchasing power is only encouraging them to speed up investments overseas.

"The incentives to invest domestically are underwhelming," said Kenneth S. Courtis, a former Goldman Sachs Asia vice-chairman who now heads Starfort Investments in Hong Kong.   Continued...

Employees work at an assembly line in AutoAlliance Thailand, a Ford and Mazda joint venture plant, located in Rayong province, east of Bangkok, in this September 17, 2013 file picture. REUTERS/Chaiwat Subprasom/Files