Shinzo Abe desperately trying to get Japanese companies to spend … but they don’t want to

Shinzo Abe desperately trying to get Japanese companies to spend … but they don’t want to

Instead, companies are fearful of another economic downturn as stagnation and deflation persist.

As the yen weakens, Japanese manufacturers are shifting production back to Japan and away from China — but even as manufacturing picks up, companies aren’t eager to invest new capital in factories and equipment despite calls from Prime Minister Shinzo Abe to start doing so.

Abe is trying desperately to put in place an economic revival plan that would pull Japan out of many years of stagnation and deflation, but companies seem unwilling to use cash for new investment, according to a Reuters report.

Despite the benefits manufacturers have gotten from lower interest rates and a weak yen, companies still have low growth expectations, preventing them from investing in more capital.

Things may be fine now, but companies in Japan are constantly wary of slumping demand and sudden inflation returning at any time.

One example is Daikin Industries, a manufacturer that most figure out how to do more with less as Japan remains mired in slow growth. With the peak season for room air-conditioners approaching, Hirotoshi Ogura, head of Daikin, is trying to figure out how to boost output by about 20 percent at a plant in western Japan that had almost been abandoned years ago.

However, they have no budget for capital investment. So Ogura must figured out how to be creative without spending a lot. “Anything we need, we first try to build ourselves,” he said according to the report.

Daikin isn’t the only one that is focused on shifting production back to Japan. Panasonic has done the same, as has Sharp and Canon.

Toyota recently unveiled the results of a program to change the way it makes cars in order to reduce the cost of retooling factories and building brand new facilities. Toyota is running its factories at 90 percent capacity. The company is trying to make cuts in many different areas to maximize efficiency and avoid the need for more capital investment.

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