Japan must take steps to become ideal site for corporate headquarters

Electronics giant Panasonic Corp. has announced that it will transfer its procurement and distribution functions -- in other words, part of its company headquarters -- to Singapore.

To stay competitive against rivals such as South Korea's Samsung Electronics Co., Panasonic must cut back expenses by buying materials and parts in bulk and narrowing down the number of types needed. It's a rational step for a company to take, but it can also contribute to a hollowing out of domestic industry.

We can't stop Japanese corporations from moving overseas. The Japanese market is declining due to the nation's low birth rate and aging population. If corporations are to grow, they must target foreign markets, particularly ones in rapidly rising Asia.

However, Panasonic has decided that it must relocate some parts of its headquarter functions like procurement and distribution, judging that merely transferring production bases would not suffice.

Indeed, in Japan, distribution involves various restrictions, and infrastructure at airports and ports pale in comparison to Singapore's. Relocating Panasonic's distribution hub to Singapore significantly cuts costs. The quality of foreign-made components is improving. Japanese products tend to be expensive, and consumers often complain that they are out of reach.

A logical move for one corporation, however, could end up being a bad step for Japan as a whole. As a result of the outflow of Japanese corporations, domestic employment in manufacturing was down by 3 million last year as compared to 1996.

This trend has not only continued in post-March 11 disaster Japan, it has accelerated. Many companies have indicated in a Ministry of Economy, Trade and Industry survey that they have either relocated overseas or are considering doing so.

It's undoubtedly a troublesome state of affairs, but we must not take an entirely pessimistic view. Instead of interpreting these developments as the flight of Japanese industry abroad, we could view the recent moves as the result of Japanese companies reaching for the opportunity to expand overseas. Corporations with vitality should not shrink from the chance to do so.

A measure against deindustrialization is necessary, but we can't forcibly tie down Japanese companies. We must deregulate the Japanese market and increase transparency and openness. In addition, we must reduce the cost of corporate activity, and drastically lower corporate taxes to levels seen in our Asian rivals.

A key to all this is the Trans-Pacific Partnership (TPP). Some argue that the TPP would further contribute to Japan's deindustrialization, but it will actually serve to re-inject some dynamism into the Japanese economy by increasing both imports and exports. Japan should become a member as soon as possible.

Deindustrialization is a problem in Europe and North America as well, but those regions still have an influx of foreign currencies. Meanwhile, Japan is experiencing a one-way, outward flow. We must implement deindustrialization measures that make Japan a country in which both domestic and foreign corporations will want to base their headquarters.