17 SAJ member companies to join hands in Japan’s most ambitious modernisation plan yet

Together, the 17 members of the Shipbuilders’ Association of Japan (SAJ) are launching the nation’s most comprehensive modernisation project to date. 

The SAJ announced on Wednesday that it intends to increase Japan’s domestic shipbuilding output in the next ten years and is looking for a JPY350-billion ($2.3 billion) government investment. 

In line with government goals to improve energy resilience and economic security through a revitalised maritime sector, the plan, if authorised, would be Japan’s greatest coordinated shipbuilding investment since the 1980s, Splash reported. 

JPY350-billion investment allocation

The JPY350-billion investment will be used to upgrade automation, modernise ageing yards and increase capacity at several locations across the country, according to information published by Nikkei Asia. 

As part of US President Donald Trump’s effort to develop shipbuilding alternatives to China, Tokyo is preparing a greater JPY1 trillion ($6.6 billion) state-led fund to revitalise Japan’s maritime industrial base and attempt to attract some American business. 

The member companies concede that they have limited capacity to finance the remaining JPY1 trillion ($6.6 billion) framework without state backing, but they intend to raise the initial JPY350 billion ($2.3 billion) through internal funding and loans. 

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Hurdles still yet to be overcome

There are still major obstacles in spite of the resolution. 

A significant obstacle is the fierce pricing rivalry from heavily subsidised South Korean and Chinese yards. 

Average capacity utilisation rates might fall from 50 percent this year to only 20 percent by 2027 unless Japanese shipyards get a significant influx of new orders, according to Danish Ship Finance. 

This would jeopardise both industrial productivity and the retention of skilled staff. 

Further impediments include structural concerns such as an ageing workforce, a lack of coastal land for new facilities and a slower rate of legislative reform in comparison to the rapid developments in technology.

Japan’s prime years  

Japan held an elite position in shipbuilding for many years. 

In the 1990s, it produced almost half of all ships worldwide. 

However, a steep drop was caused by fierce price rivalry, significant state subsidies, and economies of scale that South Korean and Chinese yards were able to exploit. 

Japan now only accounts for about 10 percent of the worldwide market, considerably behind South Korea and China, which account for 70 percent of newbuild capacity.

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