When steel prices hit a record high of $2.15 a pound last year, the industry faced an existential crisis.
There were no easy solutions to this problem, not least because steel was one of the few things the government could afford to bail out the global economy, the country’s premier, Shinzo Abe, told reporters at the time.
Steel production in Japan, however, was not at risk of falling, and the government was confident that the global steel industry would keep growing, with a strong supply chain and the ability to compete with cheap imports.
In fact, Japan’s steel industry was already growing.
In 2012, the number of steel mills expanded by 30 per cent, and by 2021, it was expected to grow by 70 per cent.
But the world’s biggest steel companies are struggling to compete in an increasingly competitive global marketplace, and steel production in the country is falling.
The world’s largest steel companies, including UBS, have reported a net loss of US$4.5bn for 2016.
And as global demand for steel shrinks, so does the supply chain.
The global steel supply chain is in tatters.
Source: Reuters/Robert Galbraith The steel industry’s future is in peril, with the Japanese government promising to cut its production by 40 per cent this year, or a quarter of the current levels.
But there is hope that Japan will be able to survive the crisis.
A series of steps the government has announced are designed to help the industry, but they are not enough.
First, the government will step up the subsidies for steel manufacturers to help them survive the downturn.
In 2020, Japan will spend US$300bn (£250bn) on subsidies to help steel companies to reduce production and exports, according to the Financial Times.
But in 2019, the Treasury will introduce a new tax on steel imports to help keep domestic production up.
This tax will be applied to both imports and exports.
As the price of steel rises, this will increase the price paid by consumers in Japan.
Second, the Japanese authorities have promised to extend subsidies for domestic steel producers to 2020.
The first step, which will see the government subsidise the cost of steel production for a year, will be the largest step yet.
This will be extended from June 2020 to July 2020.
At the end of 2020, the price will be reduced to US$1.60 a tonne, which is the current average price.
The government will then introduce a subsidy of up to US20 per cent for steel imports and up to 60 per cent of the cost for domestic production.
The price of exports will be raised from US$5.80 to US7.70 a ton, and for domestic supplies it will be increased to US8.20 a ton.
By 2022, the subsidies will cover 60 per per cent and 90 per cent respectively of the price for steel, and 70 per 100 per cent in total.
And by 2022, they will cover 70 per one cent and 100 per one per cent as well.
This new subsidy will help steel manufacturers cope with a sharp decline in demand and the impact of a global recession.
The Japanese government is hoping that this subsidy will create a strong base to help sustain domestic production, and this is something that all countries should be able help in, says Professor Masahiko Suzuki, from the Graduate School of Business, at the National Graduate University of Japan.
The subsidies are a long-term plan, and we should be very optimistic that they will be sustained, he says.
Third, the subsidy will be paid in a tax, which the government hopes will encourage steel producers.
But this will be a temporary measure, and there will be no automatic tax payments for a long period of time.
As steel prices rise, the tax will increase.
But, according the government, it will not affect steel’s competitiveness in the long term.
This means that there is a very good chance that the subsidy, which comes into effect in 2021, will continue indefinitely, despite the recent downturn.
And while the Japanese steel industry is struggling to recover, there is no question that there will always be demand for Chinese steel, says Mr Suzuki.
In 2018, the US$16bn stimulus package was approved by the US Congress.
The deal includes tax cuts for manufacturers, increased federal investment in domestic steel production, a $500m tax credit for Japanese steel producers, and a subsidy for domestic suppliers to help export steel to Asia.
So it’s hard to imagine a future when Japanese steel is not exported to the rest of the world, and is not supported by tax cuts and increased federal government investment.
And that’s a situation that the Japanese Steel Association says is “exceedingly dire”.
“Japan has always been a global leader in steel production,” says Masayuki Takashima, president of the association.
“But, with steel prices at record highs, the Chinese steel industry has