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As Japanese manufacturing declines, a factory town fights for survival

By Sakura Murakami

Higashi Osaka, Japan (Reuters) – Small factories in the western Japanese city of Higashi Osaka have fueled the meteoric rise of the country’s biggest brands for decades – but Japan A weaker yuan and rising costs have accelerated a slow decline that is reshaping the industrial heartland.

about 6, companies, 87% of companies have fewer than 87 employees, and the city symbolizes this power How to push Japan’s small manufacturers to the tipping point.

The workshop in Higashi Osaka, which makes metal parts for everything from train seats to ballpoint pens, has long relied on powerhouses like Sharp (OTC: SHCAY ), Panasonic (OTC: PCRFY) and Sanyo orders.

Now Sanyo is gone and acquired by Panasonic. Jobs have generally dried up in recent years in the face of competition from South Korea and China; Taiwan’s Foxconn moved much of the company’s manufacturing outside of Japan when it bought Sharp.

The various problems facing Higashi-Osaka—an aging population, offshoring, and a devaluing currency—reflect the problems facing the world’s third-largest economy and the foundation of its global exports, which The problem hit 19. 1 trillion yen ($136.19 Ten billion) last year.

A factory in the city, aircraft parts maker Aoki, is turning to the food industry after being hit hard by the pandemic. Another maker of air drill parts, Katsui Kogyo, raised prices for the first time since it opened 1967. Lampshade company Seiko SCM has scaled back production and is looking to revive manufacturing in Higashiosaka by converting part of its headquarters into a co-working space.

“It’s like a frog being cooked alive,” said Hiroko Kusaba, CEO of Seiko SCM. “We all believed that the big brands would always protect us, but things are different now.”

HUMAN CONNECTION

Over the past six months, the yen’s The value plummeted from about 130 in early March to a higher JPY/USD exchange rate than in August 130 Yuan. While a weaker currency would boost export profits, to the extent it would make material costs so high that it offsets that benefit.

The pain of COVID also lingers: 67 According to a survey conducted by the local chamber of commerce in April, % of small businesses in Higashi Osaka say they are still hurt by the pandemic.

For these businesses, weathering the economic storm is not just about surviving, but about protecting the industrial ecosystem.

SMEs account for 136 .7% of companies and 68. 8% of Japanese employment. But according to the 136 government, these companies represent only 54.9% The economy of

The history of the area around Higashi-Osaka as a manufacturing center goes back hundreds of years. The city still has an industrial enclave, with small factories crammed between houses, hammering, sawing and shaping metal from early morning to dusk.

This promiscuous production has created human connection and a sense of community, said Hirotomi Kojima, CEO of air rig company Katsui Kogyo. This provides a vital support network, but it is also difficult to pass on higher costs.

Kojima raised prices in October. Material costs have since soared, but he is hesitant to raise prices again, fearing he might lose old customers. Price increased.

“The closer I get to the client, the harder it is to start a conversation,” Kojima said.

Torn between protecting these connections or hurting Kojima in his First search for new clients in my years as CEO.

He often visits Boshin Yabumoto, a close friend who manages another manufacturer of air drills. Although they are in direct competition, they pass orders to each other and share customers.

“We want manufacturing and this culture to stay,” which is more important than being the last standing, Yabumoto said.

Slow decline

For the past decade or so, Meadows and Isles have seen at least one factory quietly shut down every year with the death of an aging boss , get sick or close a business where they have no heirs.

The surviving companies have close ties. Kusaba is not from the city, and she says locals — such as bakers and rice sellers — anchor her in the community.

“They came to me to say how business was down, how they had so many customers before the boom in manufacturing, and how times have changed so much,” has been at Seiko SCM’s CEO has been years.

That’s why she’s turning to her independent business to protect her bottom line and help manufacturers in Higashi Osaka.

In June, she reduced the company’s die casting department from 6 to 3 people and reduced the number of machinery. Instead, she’s creating a co-working space and opening a “shared factory” where users can pay to use machines and resources, reducing fixed costs and increasing output.

“The big brands, the big manufacturers — they abandoned us,” Kusaba said. “Now, we need to communicate directly with consumers. We only have ourselves to rely on.”

Her decision means her competitors will have more die-casting work, but Caochang said she will be with them Watching the entire industry go to ruin.

“Competition is not the way to survive. We have to join forces,” she said.

NON-ESSENTIAL

Aoki, labelled ‘non-essential’ during the pandemic, is trying to avoid being dragged down by a COVID-disrupted aviation industry -20. CEO Osamu Aoki pinned his hopes on another area: food manufacturing.

He is designing and building a machine for processing meat. Currently, it is at the Aoki factory, where workers are fine-tuning the equipment.

While he predicts the food industry will provide greater stability, Aoki expects his electricity bill to double in August – an increase of 8 million yen, which will require a 4% increase in revenue to make up.

Japan’s manufacturing industry has traditionally relied on selling value-added products, and a weaker yen boosts profits. But that no longer seems true, Aoki said.

“I think it’s a liquidation,” said of the devaluing currency. “It’s time for a re-evaluation.”

Manufacturing Tradition

Changes and experiments in Higashi-Osaka do not guarantee its survival, nor the survival of Japanese small businesses survival culture.

“If the factories can afford the extra cost, we won’t see a complete collapse…but the longer (high prices) drag on, the harder it will be for them,” said the Higashi-Osaka Chamber of Commerce’s Naohito Umezaki.

He added that the social fabric of the city has begun to fray as the family business permanently shuts down; the priority is to find someone to take over and keep the manufacturing tradition going.

In Aoki, 19 year-old Yuto Miyoshi decides whether to succeed his father in running a family welding in a neighboring city Business asks CEO for advice.

“My father often warned me about the hardships of running, Miyoshi told Aoki.

But he added that on rare occasions his father drank too much What does it mean to him to let him drop his succession plan.

“He said: ‘I would be happy if you took over,'” Miyoshi said.

($1 = 136.1100 JPY)

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