Are Japanese firms changing their apparel sourcing policy?

Did Japanese importers’ decision to move sourcing away from China drive their prices up? And are they now changing their minds?

In 2011, China accounted for 87% of Japan’s apparel imports, and a few years earlier, Japan’s garment makers had collectively decided they were too reliant on one source – and a source Japan had a long history of enmity with. Over the following few years, imports shifted elsewhere in Asia, so that in the first seven months of 2014, China accounted for 77% of Japan’s clothes. From time to time, Japanese spokespeople hinted at plans to get this share down to 60% by the middle of the decade – though it was never clear whether this was a prediction or a cast-in-iron objective.

Now here’s two funny things.

• Almost the minute Japanese firms decided to move out of China in earnest – around 2011 – inflation in Japan’s clothing imports diverted from the pattern the  EU and US were seeing. Imported clothes started getting pricier, while in the EU and US they fell 

• After three years of price rises, Japanese garment importers started buying relatively more clothes from China in August of this year. China’s share of Japanese imports rose from 77% in the first seven months to 79.6% in August.

Both of these anomalies might have several different explanations. The Japanese are paying more for lots of imports, because the yen’s devalued against the dollar, for example. Falling imports of clothes are at least in part the result of falling Japanese clothing retail sales – mostly because of sales tax rises. Contracts with Chinese factories might just take longer to wind down than contracts with Cambodian and Burmese factories – who are probably easier targets for buyer bullying.

But the anomalies do hint at another possibility. The widespread myth that American and European buyers are pulling out of China is inaccurate – but it’s based on two truths: Chinese wages are growing fast, and Western buyers are worried about that. European and American interest in moving elsewhere is largely based on value for money.

The undoubted truth that Japanese buyers did pull out of China after 2011 is based on a completely different logic: Japanese buyers were worried about over-reliance on any one source (by 2009, Chinese factories were masking over 90% of all the clothes worn in Japan) – and the violence aimed at Japanese-owned shops in China during 2012 and 2013 made it clear than few thugs were going to be worried about the possible loss of manufacturing orders elsewhere in China. Costs outside China weren’t the issue.

Since 2011, the yen has devalued – and most costs in Cambodia, Vietnam and Burma are dollar-based. So maybe costs are now becoming the issue? Is it possible that some Japanese buyers are having second thought about moving production out of China?

It’ll take a few months to see: no Japanese buyer sees much need to tell the outside world about his (it almost always is “his”) plans. But I wouldn’t be surprised to see a few “reshoring” stories in the near future – where China is the beneficiary