Prime Minister Yoshihide Suga is expected to reach an agreement with Vietnamese Prime Minister Nguyen Xuan Phuc to cooperate on strengthening supply chains for pharmaceuticals and other products for Japan when he visits Vietnam in mid-October on his first overseas trip since taking office.
The government is seeking to diversify supply chains and avoid dependency on China after the supply of masks and other products from the Asian giant was disrupted due to the spread of the novel coronavirus.
To bolster supply chains, the government decided in July to provide subsidies to Japanese companies with factories in ASEAN (Association of Southeast Asian Nations) producing such products as masks, medical protective clothing, semiconductor manufacturing equipment parts and auto parts for the Japanese market. Japanese companies based in Vietnam made up half of the 30 applicable cases.
The government is planning to provide second and third rounds of such subsidies to Japanese companies, including those in Vietnam, during the current fiscal year. Suga will explain this policy at the summit meeting with Phuc, when he requests further cooperation to strengthen the supply chains. The Vietnamese side is also expected to benefit through an increase in employment as production expands.
The number of Japanese companies operating in Vietnam has been increasing, totaling 1,943 companies last year, more than double the number 10 years ago. An increase in labor costs in China is seen as one factor. "Vietnam's presence as a supply chain is growing," said a senior Japanese government official.
In the summit meeting, the two leaders will also confirm their cooperation in realizing the Japan-led vision for a "free and open Indo-Pacific," keeping in mind China's growing expansion into the East and South China Seas.
Suga, briefing attendees at the Liberal Democratic Party's board meeting on Tuesday on his planned visit to Vietnam and Indonesia next week, emphasized, "ASEAN is located at the center of the Indo-Pacific region and is vital for the realization of a 'free and open Indo-Pacific.'"
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