Toyota Resumes China Operations After Protests

Toyota Motor Corp. (7203) and Aeon Co. (8267), Japan’s largest auto and retail companies, are resuming operations in China after protests over a territorial dispute hurt sales and disrupted production for Japanese businesses.

Toyota said it expected to fully restart production today in China, where protesters torched auto showrooms and smashed Japanese-branded vehicles last week, spokesman Joichi Tachikawa said. Aeon has reopened all of its China stores except two and is assessing damage on one that was attacked, according to spokesman Tomohiro Itosaka.

Demonstrators protesting Japan’s purchase of islands claimed by both countries last week ransacked stores and auto showrooms, forcing firms from Fast Retailing Co. (9983), a seller of Uniqlo apparel, to Honda Motor Co. (7267) to shutter Chinese outlets and factories. Fast Retailing expects China sales for last week to be about 20 percent less than usual even as it plans to reopen all outlets by today, spokesman Keiji Furukawa said.

“Sept. 18 was the worst when we closed 60 stores temporarily,” Furukawa said. “The sales on that day were one third of what we would have gained.”

Honda has been able to reopen its factories in China, although it hasn’t fully recovered from the closures, President Takanobu Ito said on Sept. 21.

A demonstrator wears a glove bearing the national flag of Japan during a protest outside the Japanese Embassy in Beijing, China, on Tuesday, Sept. 18, 2012. Photograph: Nelson Ching/Bloomberg Close

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A demonstrator wears a glove bearing the national flag of Japan during a protest outside the Japanese Embassy in Beijing, China, on Tuesday, Sept. 18, 2012. Photograph: Nelson Ching/Bloomberg

Island Fight

Japanese auto sales in China will be hurt next month as a result of the tensions, Akio Toyoda, president of Toyota and chairman of the Japan Automobile Manufacturers Association, said in a briefing in Tokyo last week.

Japan’s three biggest carmakers -- Toyota, Nissan Motor Co. (7201) and Honda -- had reported attacks on their dealerships in the eastern port city of Qingdao and halted production at Chinese plants.

Companies started to resume operations after demonstrations eased at the end of last week. The dispute between Asia’s two largest economies flared up earlier this month after Japan’s government said it would buy the islands, known as Diaoyu in China and Senkaku in Japanese, from their private Japanese owner.

China claims that it’s owned the islands for centuries, while Japan argues it took administrative control of them in 1895, lost its claim after World War II and had the islands returned to it in 1972.

The diplomatic crisis, the worst between the two countries since 2005, prompted street protests in Shanghai, Beijing and other Chinese cities.

Japanese companies will probably be able to recover lost production and the unrest will have a limited impact in the short term, although the longer-term effect is “difficult to determine,” Moody’s Investors Service said in a report.

Police Barricades

The ratings firm said the automobile industry is “better- positioned” to sustain short-term declines in sales in China amid strong global vehicle sales. The consumer electronics industry is more vulnerable as it undergoes restructuring, it said.

Canon Inc. (7751) halted operations at its factory in Zhuhai, Guangdong province on the afternoon of Sept. 21, after a temporary resumption the previous day, according to spokesman Hirotomo Fujimori. The company’s factory in Zhongshan, Guangdong, also halted work amid employee concerns over anti-Japan protests, he said.

Panasonic Corp.’s (6752) Suzhou factory is back to normal, while output partially resumed at another one in Qingdao on Sept. 21. A Zhuhai factory has stopped operations as about 10 Chinese employees protested, spokesman Atsushi Hinoki said.

Seven & I Holdings Co. (3382), the owner of the 7-Eleven convenience store brand, has reopened all shops that it had closed in China. “There was almost no damage to our stores because there were barricades by armed police,” spokesman Hirotake Henmi, said by phone.

Trade Relations

The diplomatic spat endangers trade relations between Asia’s largest economies and comes as second-quarter economic growth in China moderated to the slowest pace in three years.

Japanese companies have been investing in China despite that slowdown. Foreign direct investment by companies from Japan surged 19.1 percent from a year earlier to $4.73 billion in the first seven months of 2012, according to the Chinese Ministry of Commerce.

About 700 people marched in central Tokyo on Sept. 22 to protest China’s claim to the rocky islands and the presence of Chinese surveillance ships in nearby waters, the Sankei newspaper reported on its website, citing police estimates.

Airlines Reduce Flights

China “strongly” opposes the landing of Japanese citizens on the disputed islands, the Foreign Ministry said on Sept. 22. Japanese nationals visited the islands with the excuse of preventing a landing by Taiwanese activists, the ministry’s spokesman, Hong Lei, said in a statement.

Japan Airlines Co. (9201) said last week it will reduce services to Beijing and Shanghai starting Oct. 10 until Oct. 27. All Nippon Airways Co. (9202) will fly smaller planes to Beijing from Oct. 17 until Oct. 31.

China Southern Airlines Co. (1055) and other Chinese carriers have also pared services to Japan amid a boycott that prompted the cancellation of planned trips to Japan by Chinese holidaymakers, according to Citigroup Inc. Cancellation rates for vacations in Japan may increase further ahead of weeklong Chinese holidays starting Oct. 1, Citigroup analysts Vivian Tao and Rigan Wong wrote in a note last week.

To contact the reporters on this story: Yuki Yamaguchi in Tokyo at yyamaguchi10@bloomberg.net; Shunichi Ozasa in Tokyo at sozasa@bloomberg.net

To contact the editor responsible for this story: Stephanie Wong at swong139@bloomberg.net

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