Japan Pursues Shipbuilding Revival with 1 Trillion Yen M&A and Private Fund Initiatives

Japan's Shipbuilding Market Share Falls Behind China and South Korea
China Takes Overwhelming Lead, South Korea Holds Second Place

The Financial Times (FT) reported on July 7 (local time) that Japan is working to strengthen its shipbuilding industry through mergers and acquisitions (M&A) and proposals to establish a fund worth 1 trillion yen (approximately 9.4 trillion won).

Imabari Shipbuilding, the largest shipbuilder in Japan, announced on June 26 that it will increase its stake in Japan Marine United (JMU), the second-largest, from 30% to 60%, making JMU a subsidiary. This move will create the world's fourth-largest shipbuilder.

Imabari Shipbuilding stated, "Japan's share in the shipbuilding industry has fallen far behind China and South Korea," and added, "Both companies will leverage their strengths and work together for the advancement of Japan's shipbuilding industry."

Efforts to rebuild the shipbuilding industry have also been observed in the political sphere. A special committee under the ruling Liberal Democratic Party proposed to Prime Minister Shigeru Ishiba the creation of a 1 trillion yen public-private fund to modernize shipbuilding facilities, as well as a plan for the government to construct a national shipyard and lease it to private companies.

The committee warned, "If we do not respond, Japan risks losing its shipbuilding industry just like Europe and the United States," and added, "The loss of the shipbuilding industry would threaten Japan's maritime logistics, economy, and security."

Recently, while the market shares of South Korea and Japan have been declining, China has been rapidly increasing its share. According to data from Clarkson Research, the market share based on orders (in compensated gross tonnage) in 2018 was South Korea (37.4%), China (32.3%), and Japan (19.0%). Last year, China's share soared to 70.0%, while South Korea (15.1%) and Japan (6.8%) both declined.

In terms of market share based on deliveries, in 2018, China held 37.6%, South Korea 24.8%, and Japan 24.0%. Last year, China took a majority with 53.3%. Meanwhile, South Korea slightly increased to 28.0%, but Japan's share was halved to 11.8%.

With China's shipbuilding industry now overwhelmingly competitive, the FT reported that U.S. officials believe it is necessary to strengthen Japan's shipbuilding sector to keep China in check.

According to multiple anonymous sources, the Japanese side proposed the creation of a fund to jointly rebuild the shipbuilding industry during tariff negotiations with the United States, and the U.S. side also supported the idea.