New Investments To Boost Japan Machine Tool Industry

By Pramod Thomas

The Japanese machine tool industry expects to get orders for around Yen 1,600 billion in 2019, up by 11.9 percent compared to 2018, mainly fuelled by increased domestic demand and fat order book from Europe and North America, Masayoshi Amano, President, Japan Machine Tool Builders’ Association (JMTBA) told AutoParts Asia. Though the China-US trade war and Brexit remain major challenges, domestic capacity expansion in line with the economic expansion, Olympic Games 2020-related investment and labour-saving investments to address the labour shortage will be major boosters, he added.

According to JMTBA, the domestic demand in 2019 will be Yen 700 billion (up 6.7 percent) and the exports will be Yen 900 billion (up 15.5 percent). Asia accounts for 24 percent of the total exports followed by Europe (13.1 percent). The major countries which import Japanese machine tools are China, USA, India, South Korea and Germany.
JMTBA is a non-profit trade association of metal-cutting machine tool builders. Founded in December 1951, it was reorganised as a non-profit trade association in July 1978 to conduct business activities within a framework appropriate to the current era. As of July 2018, 98 companies were members of JMTBA and they account for about 90 percent of the value of production of machine tools in Japan.

“The association’s goals are to ensure the integrated growth of the nation’s machine tool industry and to contribute to the sound development of the Japanese economy. Our main activity is lobbying for policies to increase the production incentives for the industry and organising the Japan International Machine Tool Fair (JIMTOF), the biggest Machine Tool show in Japan, which is held in every three years. We also participate in big shows in Chicago, Beijing, and Hannover. In all these shows we have our own booth to promote Japanese industry. Besides, big companies from Japan also participate in these exhibitions. From the association’s booth, we normally promote Japan companies and JIMTOF. We conduct surveys regarding production, distribution and export/import of machine tools, management, taxation systems and financing systems. JMTBA also promotes international exchanges related to machine tools through the dispatch and invitation of specialists and the exchange of data, written materials etc. We also promote basic and applied research on machine tool production engineering. Development and dissemination of specifications and standards for machine tools are also our mandate,” Amano said.

Japan Machine Tool production increased drastically in the last two years. The rapid growth was due to the increase in external as well as domestic demand. However, the latest data from JMTBA reveals that the total value of machine tool orders in February 2019 was Yen 109.74 billion. This was a decrease of 12.5 percent compared to January 2019 and marked the second consecutive month of month-on-month decline. Moreover, this figure represented a decrease of 29.3 percent compared to the same month of the previous year and marked the fifth consecutive month of year-on-year decline.

The association attributes the downward trend to the uncertainty over the future, such as the slowing of the Chinese economy, the impact of trade issues and global economic trends.
“Recently the trade to China is a little bit decreased. One of the reasons for this may be the ongoing trade-war between China and the US. Besides, there may be some issues with the Chinese economy. There is a possibility that there may be a little slow down in the total order, but still at a high level. The main China market has weakened due to the impact of trade friction between the US. Nevertheless, the last three years we have registered very high growth. In Asia, India and ASEAN growth is steadily increasing,” Amano said.

The Japanese companies have strong competitiveness in terms of high-quality, hence there is a big possibility to increase sales, he hopes.

Economic Revival

According to Amano, economic revival in Japan will spur growth in the machine tool industry and would help it to stride over turbulent times. He also relies on the automotive industry which constitutes a major consumer base contributing 23.5 percent of the total demand of machine tools.

“Automotive industry is the most important consumer of the Japanese machine tools. All Japanese companies are very much interested in this segment. Now people are talking about electric vehicles. There is also an opportunity for Japanese machine tool companies to keep selling products to the automotive industry when the electric vehicle boom kicks in. High-quality products are required for electric vehicles and Japanese companies are well known for their quality. So there is immense scope for our companies in this space,” he said.

He further said that investing in the EV space depends on individual companies. In addition to policy effects, demand for automobiles and semiconductors have been favourable, contributing to an increase in domestic demand, Amano said.
The GDP growth in Japan in 2019 is estimated at 1.3 percent up from 0.9 percent registered in 2018. Amano underlines that this is an opportune time for the machine tool industry, especially with business activities related to the 2020 Olympics in Tokyo.

“Japanese economy is expanding moderately, with the virtuous cycle from income to spending. The economy is expected to continue recovering, supported by the effects of the policies, while the employment and income situation is improving. The expected growth is mainly against the background of highly accommodative financial conditions and the underpinnings through government spending, with overseas economies continuing to grow firmly. From fiscal 2019 through fiscal 2020, the economy is expected to continue on an expanding trend, partly supported by external demand, although the growth pace is projected to decelerate due to a cyclical slowdown in business fixed investment and the effects of the scheduled consumption tax hike,” Amano said.

Advancements in machine tools have contributed to the development of diverse industries ranging from those engaged in manufacturing familiar household products to the aerospace industry. Of late, more and more Japanese companies are investing in digitisation, IoT, automation and 3D printing etc, he said. JMTBA praises these mega-trends as the most important changes in the machine tool industry.

“Currently, all our member companies are trying for digitalisation, IoT and automation. The investment magnitude is depending on individual companies. But in general, Japanese companies are major players in these areas as these are very important trends now,” Amano said.

When asked about the relationship with India in the machine tool space, he said that India is the fourth largest exporting country for Japan.

“However, the overall export of machine tools to India is only four percent. Hence, I think there is a big possibility for Japanese companies to export and to invest more in India. As a country, India has big opportunities. Indian economy is growing. Because of the population in the country, India is a huge market for Japan. I foresee opportunities in cooperating between these countries in the IoT, digitalisation and automation. Indian people are very intelligent and the quality of education is also very high in India, especially in technological areas,” Amano said.

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