Government backed help for earthquake-hit Japanese auto industry suppliers is on the way, according to media reports.
The Development Bank of Japan plans to set up a fund to inject capital into parts makers hit hard by the 11 March earthquake/tsunami, a DBJ official told Dow Jones.
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The DBJ and parts manufacturer groups plans to announce the rescue fund on Thursday, the official said, adding that the fund’s first investment in the sector will be made within the next couple of months.
A separate source said Monday the new fund could be worth around US$620m.
Japanese automakers have been forced to cut vehicle production to half of normal levels due to a chronic shortage of locally sourced components in the wake of the massive quake and curtailed exports of parts made exlcusively in Japan – certain computer chips and paint pigments – have affected production overseas.
Dow Jones said that, as Tier Ones graduallly restore output to automakers ramping back up, the huge number of subcomponent manufacturers may face a steeper road to recovery. The government in Tokyo and local industry groups are concerned lost business outsourced to domestic and foreign rivals may not return to smaller and financially weaker firms.
Japan Auto Parts Industries Association (JAPIA), which represents over 400 suppliers nationwide, confirmed it was discussing such a fund with the DBJ to invest in damaged parts makers mainly in quake-hit Iwate, Miyagi and Fukushima prefectures but said the details were still being worked out. In recent weeks the Japan Automobile Dealers Association has focused on aiding some 200 especially troubled Japanese parts makers, down from upwards of 500 immediately after the quake struck.
The ultimate size of the fund to be launched by the DBJ in cooperation with the Japan Auto Parts Industries Association hasn’t been finalised yet, but “it could be around” JPY50bn, a source told Dow Jones.
Private financial firms will also be invited to invest in the fund, the DBJ official said.
