JAPAN’S FUTURE as a leading exporter was thrown into doubt yesterday as Sharp, one of the country’s biggest manufacturers, warned it would have to shift core production offshore because of the cost of investment and the strength of the yen.

Mikio Katayama, Sharp’s president, said that in future “exports from Japan will not make sense even in the most advanced technological fields”.

Sharp is one of the first large manufacturers to respond to the yen’s strength with a shift in strategy rather than cost cuts alone. If others follow and change their business models to manufacture overseas it could lead to fundamental changes in Japan’s export-dependent economy.

Sharp said it planned to make a gradual transition in many of its own business lines to a model of “local production for local consumption”.

While the company already has many foreign assembly plants, the new strategy would see core components produced abroad in some business lines, with local partners owning majority stakes in its overseas subsidiaries.

One model could be Sharp’s announcement last November that Enel, Italy’s largest energy company, would take a majority stake in a new Y100 billion (€752.9 million) venture to produce solar panels in Europe.

Sharp also warned that its operating loss for the year to March 2009 would be Y60 billion – double its previous estimate – because of a Y30 billion provision to write down the value of unsold inventories. – Copyright The Financial Times Limited 2009