Increasing competition and rising labour costs in China are forcing apparel makers and retailers from Japan to shift focus away from the country, while some have reverted to domestic production. In 2016, women's apparel company Itokin, headquartered in Tokyo, withdrew all its operations in China after the company concluded that there is no prospect of its earnings improving there. In February the same year, the company was brought under the umbrella of Tokyo-based investment fund Integral. Although the company had 300 stores in China at its peak, intensifying competition with local rivals had eaten away at corporate profits.
Womenswear retailer Honeys, headquartered Iwaki, in Fukushima Prefecture, is well on its way to close its flagship stores and department stores in China. While continuing to open new outlets, it plans to close about 270 stores in the three years through this spring, bringing its total outlet count to 430. According to an official of the company it is not only at department stores but also shopping centers where the competition has been intensifying. Other Japanese apparel companies are reviewing their manufacturing strategies in China too.
Earlier, many Japanese manufacturers moved their production facilities to China in pursuit of cheap labour but increasing labour costs have jeopardized their competitive edge as a low-cost manufacturing. Even though the country is no longer enjoying double-digit economic growth, average wages are increasing by 10 per cent a year.