Japan – the supply chain market to watch in 2015?

Which is the hottest logistics market to watch in 2015? China, Indonesia, Mexico? Well, if economists are to be believed surprisingly enough, it may be Japan.

After decades of stagnation, the Japanese economy is showing signs of life and the recent weakening of its currency could create ideal conditions for a surge in ‘re-shoring’ activity.

The Yen has depreciated from ¥78 to ¥120 to the US dollar in just two years. This is already having a beneficial impact in terms of tourists, which are now flocking to the country. However if Japanese and global manufacturers can be convinced that the depreciation is structural rather than short term it could also significantly impact on supply chain strategies.

There are of course downsides to a depreciating currency, not least in terms of rising import costs. However the movement has given Japanese industry a huge boost, and some sectors, such as shipbuilding and steel, are claiming to be the low cost producers in the region, a transformation from just a few years ago when most Japanese corporations were looking to off-shore production.

With the recent re-election of Shinzo Abe as Prime Minister, there is growing confidence in the global community that Japan’s future is bright. There is no under-estimating that the economy has many problems to overcome – structural reforms of industry and agriculture, for a start. The Trans Pacific Partnership (TPP) trade deal will also be critical to opening up markets.

However, if a deal can be done; if Abe is successful in his overhaul of the Japanese economy and if the Yen remains at historically low levels, global business could well be encouraged to target this huge market. There have been many false dawns in the past and Japan is still a very difficult market to penetrate. This time, though, things could well be different – a prospect that supply chain managers and logistics companies should keep in mind when setting their priorities for 2015 and beyond.