Japanese companies, from carmakers to food processors, are scrambling to buy land for factories elsewhere in Asia. They are shifting production out of Japan to get around the yen’s extraordinary strength and power shortages at home.

Another problem is visible in the auto industry, the backbone of Japan’s industrial might. Carmakers are in a serious bind because of the steep rise of the yen.

“Japanese car exports may fall to zero in five years,” warned a senior executive at a major carmaker. If auto production in Japan were to fall by half, gross domestic product would shrink by about 3%, causing over 1 million job losses, according to estimates by Mizuho Corporate Bank. Such a sharp fall in domestic car production would also deliver a serious blow to steelmakers and others, harming Japan’s current account balance.

But instead of taking steps to reverse this trend, the past two Democratic Party of Japan administrations have raised the cost of doing business even more by tightening labor regulations, for example, and promising a sharp reduction in the country’s greenhouse gas emissions.

via 2011/09/07 12:27 – OPINION: Noda Must Work To Regain Business Trust.