Crows circle around the tract of cleared land that was once Hoya Corp.’s Pentax camera plant in Mashiko, Tochigi Prefecture. All that’s left is a sign directing employees to a dormitory and gymnasium, both pulled down years ago when a strong yen was driving manufacturers abroad.
This was once part of Japan’s industrial heartland, a place that shows little sign of benefiting from Prime Minister Shinzo Abe’s success in weakening the currency and battling deflation. While a 36 percent tumble in the yen has stoked record profits at big exporters like Toyota Motor Corp., the jobs lost here have yet to return.
Mashiko is in Tochigi, one of the prefectures around Tokyo that churned out the world’s gadgets and technology before Japan’s bubble burst in the 1990s and China gradually took over the mantle of production. The region is littered with abandoned or downsized plants, some from companies that are still global brands, like consumer electronics giants Panasonic Corp. and Sony Corp. Most of the blight stems from the hundreds of smaller suppliers that make up the lion’s share of Japan’s manufacturing.
“We haven’t heard of any major cases of manufacturers coming back here because of a weaker yen,” said Ryutaro Magome, a researcher at Ashigin Research Institute Ltd., a unit of Ashikaga Bank Ltd. in Tochigi. “When you think about the cost of re-creating what’s gone and the yen’s current level, it makes sense for them to keep production abroad.”
Less than an hour north of Tokyo by bullet train, Tochigi shows the scale of the task facing Abe as he tries to get companies to boost wages and employment and bring back the days of consumer-driven inflation. The number of factory jobs in the prefecture remains more than 10 percent below the level in 2008, when the collapse of Lehman Brothers Holdings Inc. sparked a global recession.
“A weaker yen is sending benefits to major exporters, but Tochigi doesn’t have many big companies and the impact hasn’t reached the smaller guys,” said Takao Watanabe, who works in the planning department of Tochigi Bank Ltd. “The labor market has yet to recover in Tochigi, which is why wages are not increasing and consumer spending isn’t improving much.”
Prolonged bouts of yen strength became a feature of the two decades of Japan’s economic stagnation before Abe took office for a second time in 2012. The prime minister championed a reflation program and installed monetary expansionists at the central bank who sent the yen tumbling.
The policy succeeded in ending trenchant deflation, revived demand for credit and sent the stock market surging, lifting household assets to a record. While still less than the pace of inflation, wages rose for an 11th consecutive month in January.
Some big manufacturers are reacting. Panasonic, air-conditioner maker Daikin Industries Ltd. and Sharp Corp., which cut TV output in Tochigi, said they may bring some work back to Japan, while Canon Inc. and Nissan Motor Co. said they plan to boost domestic output. Fanuc Corp., a maker of factory automation systems, plans to open a new factory in Tochigi next year, the company said in a statement.
Yet many companies are reluctant to boost investment in a home market where the population is declining and workers are aging. Industrial output remains below a 2007 peak, and the most recent gross domestic product report showed capital spending dropped for a third straight quarter.
Down the road from the razed Hoya camera factory in Mashiko, Yuichi Ojima runs an auto-inspection and repair shop that’s been in business for more than 40 years. He recalls the days when houses were built for workers at the plant and their families. For him, a weaker yen means more expensive imported parts.
The mention of “Abenomics,” the universal label of Abe’s economic plan, brings only a hollow laugh from the mechanic.
“I’ve never heard around here that Abenomics is helping the economy,” said Ojima, 43, who has worked at the shop for about 20 years. “It’s set up to benefit only big companies. It has nothing to do with us.”
Even Mashiko’s mayor, Tomoyuki Ohtsuka, isn’t counting on Abe to revive his town’s fortunes.
“There’s no future for regions that are just counting on the benefits of Abenomics,” he said in his office. “Times have changed and you can no longer just build industrial parks everywhere. We have to make do with what we have to replace the factories.”
For Ohtsuka, that includes the town’s centuries-old tradition of mashikoyaki pottery, like the deep dish displayed on his window seat. Like other regional cities, Mashiko is hoping its ancient crafts will draw visitors.
“The town is making efforts to promote mashikoyaki as part of tourism, but the market is shrinking,” said Hideo Nozawa, a senior manager at Tsukamoto Co., which has been making earthenware in the town for about 150 years. “Not many people are making enough to nurture the next generation of craftsmen.”
Part of the problem is that even if Abe manages to invigorate the economy, Japan’s shrinking and aging population is sapping sales, reducing the incentive for companies to expand domestic production.
Fifty minutes’ drive from Mashiko, in the industrial parks around the prefecture’s capital of Utsunomiya, the situation is just as bleak. By the banks of the Kinu River, where ayu sweetfish swim when the snow melts, there are more signs of the region’s decline.
An old, three-story Panasonic semiconductor plant stands idle, air ducts and power lines dangling from the ceiling above a concrete floor. Outside, a cold February wind kicks up dust in the vacant parking lot.
Panasonic left in 2010, part of a consolidation that the company said was to increase efficiency. Murata Spring Co., an auto-parts maker, is repairing the building to shift some production from its main factory nearby. That won’t bring back the jobs that left with Panasonic, said Shigeru Kameda, who’s in charge of the move. Murata is moving work here because its own plant nearby has a leaky roof.
Like many big Japanese auto-parts makers, Murata built plants in China and Mexico, following the carmakers it supplies.
“We’re cautious,” Kameda said. “A weaker yen is boosting the cost of materials for us, and we can’t change the trend that automakers continue to get parts from overseas.”
Panasonic shut a fax-machine plant in the city in June 2009 and the semiconductor factory followed in September 2010. The company said in its earning statement for that quarter that it was cutting costs to counter the effects of the strong yen.
Panasonic spokeswoman Chieko Gyobu said in February that the closures were part of a consolidation and the jobs were transferred to other plants.
Sites that do find a new owner are often from advanced industries or service-based enterprises that employ few workers. Fanuc’s new factory in Tochigi will add about 100 workers, according to Keisuke Fujii, the company’s spokesman. The company makes its machines mostly with other robots.
Panasonic’s fax facility covered about 6.6 hectares (16.4 acres) in its heyday and there were about 300 cars in the parking lot each day, said Yoshihiko Umeyama, who bought the site in March 2013 for his family’s warehousing company, Sanko Butsuryu-Soko.
Now the parking lot has become a turning circle for the 15-ton trailers that carry baby products, furniture and other goods for Umeyama’s clients. Inside, where hundreds of workers once assembled products, a handful of staff drive forklifts, stacking boxes of diapers and baby milk.
More than 1,000 factories have closed in Tochigi since 2008 with the loss of more than 22,000 jobs as of the end of 2013. In this industrial prefecture, factories still accounted for a quarter of all jobs in 2012, compared with 17 percent nationwide.
Shigeru Oshima, who works at a labor exchange in Utsunomiya, said he’s skeptical that much production will come back. “We have former factory sites that used to employ hundreds of people being cleared or used as warehouses.” Most jobs advertised at the center are now in services, he said.
In Mashiko, a corner of the old Hoya site gives a hint as to one possible future for Japan’s manufacturers. While the cameras have gone, this part of the company’s business is expanding: artificial bones for the nation’s growing ranks of elderly.