### Section 4. Roles played by the manufacturing industry and labour mobility

The manufacturing industry provides quality work opportunities, supports regional employment and creates employment for all industries through export, thus plays an important role in the Japanese economy.

Due to the change of manufacturing technologies, the value-added through "fine-tuning" which is the strength of the Japanese manufacturing industry has been reduced, and modularized assembly processes are now being transferred to overseas.

Although, in Japan, companies generally develop location strategies while comprehensively evaluating the closeness to related companies and markets, etc., many companies believe that they will place weight on domestic business investment in the future, in order to prevent leakage of technology, etc. It is necessary to support such future movement to increase domestic employment.

In the midst of the recent trends of modularization and digitalization, emphasis is placed on product planning, R&D, and high value-added production such as high-mix low-volume production; although some companies are moving their R&D facilities to outside of Japan, it is considered that domestic plants in Japan will play the role as base plants (mother plants) having the functions to develop and accumulate the technologies and skills for overseas markets. In this situation, cultivation of core human resources has become a challenge for the future. While there is a trend toward the increasing importance of advancement into new industrial fields and capability to develop new products and services, the companies have a strong recognition of the importance of diversification of human resources and human resource development; it is necessary for us to promote development and securing of human resources in technical fields.

In terms of all industries, the power of expanding employment is weak in the high-income sectors (such as finance and insurance industries), and is strong in sectors with relatively lower income (such as the welfare industry); this is one reason for the decline of income level. Increased labour productivity contributes to the increase of wages; it is important for us to increase labour productivity at the macro level, by increasing business investment, by creating industries with high value-added, by allocating labour to such industries through labour mobility without unemployment, and by effectively using technological advancement. Furthermore, as one way to improve terms of trade, we should increase productivity by, for example, promoting R&D investment, equipment investment, business restructuring, etc., and reflect the increased productivity to wages.

## (Through exporting, the manufacturing industry is creating employment widely for all industries, thus has a profound effect on the Japanese economy)

The employed in the manufacturing industry have been decreasing since the early 1990s; it is considered that this is because productivity has increased while the production level has maintained almost at the same level. Figure 19 shows how much employment has been created through export from the manufacturing industry and non-manufacturing industry; while export increased during the period from 1995 to 2005, employment was created through export from the manufacturing industry for about 2.9 million persons in the manufacturing industry and for about 2.2 million persons in the non-manufacturing industry; during the same period, through the export from the non-manufacturing industry, employment was created for about 0.1 million persons in the manufacturing industry, and for about 2.1 million persons in the non-manufacturing industry. One reason behind this is the difference of export values; considering that the export value of the manufacturing industry tended to increase at a rate larger than that of the non-manufacturing industry, the manufacturing industry has a profound effect on employment. The estimated lifetime earnings of high school graduates are higher in the manufacturing industry than in construction, wholesale, retail, medical care and welfare, suggesting that the manufacturing industry provides quality work opportunities, and during the stage of economic expansion, the unemployment rate is lower in the prefectures where the ratio of the employed working in the manufacturing industry is high; it is considered that the manufacturing industry has a great effect on employment.

## (Trends of plant locations in Japan)

Looking at the situation of plant locations in Japan, the number of plant locations and site areas tended to decrease in the 1990s, but there was an increasing tendency during the period from 2002 to 2007. Considering the current status of overseas business development and future strategies, it is unlikely that a "return of plants to Japan" (in the sense that overseas bases will be substituted by domestic bases) will rapidly progress on a short-term basis. However, according to Figure 20, looking at the planning of future business investment among the companies which are currently operating overseas business or are planning to operate overseas business in the future, the companies which answered "Weight is placed rather on domestic business investment" accounted for the highest percentage of 27.3%.