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Japan Acts to Revitalize Ailing Shipping Industry

July 16, 1987

TOKYO (AP) _ The Japanese shipping industry is introducing modernized vessels in its fleet in a bid to regain its international competitiveness, officials said Thursday.

Japanese merchant ships carry more tonnage that those of any other nation and its shipbuilding industry is still strong, despite recent cutbacks, Atsuo Nozaki, director of the international shipping division of Japan’s Transport Ministry said at a press conference.

But the yen’s appreciation, high operating costs and growing competition from developing countries have put Japan’s oceangoing shipping industry in a precarious situation, he said.

Japan’s largest shipping firms in fiscal 1986 suffered their worst business results since the nation’s shipping industry was restructured in 1964, with five of its six top firms posting net losses, according to company reports.

The Japanese shipping industry is in urgent need of restructuring, according to a 1987 report on Japanese Oceangoing Shipping released Thursday by the Transport Ministry.

In addition to scrapping excess vessels, Japan plans to introduce modernized ships into its merchant fleet to help cut operating costs.

Japan’s oceangoing shipping companies operate 2,249 vessels, of which 214 are so-called modernized ships which operate with a reduced crew using automated facilities, the report said.

The government hopes to increase the proportion of modernized vessels to 20 percent of the total, about 450 ships, Nozaki said.

Efforts are under way to design and produce ″pioneer ships″ - vessels that can be operated by as few as 11 people.

″In view of a recent decline in the international competitiveness of Japanese-flag vessels, the ‘pioneer ship’ experiment aimed at achieving the smallest crew in the world is to begin in the autumn of 1987,″ the report said.

At present, modernized vessels operate with crews of between 14 and 16 people, compared with at least 18 on conventional ships.

Increasing the number of seamen on Japanese ships from developing nations is another option being considered to cut operating costs, Nozaki said. ″Although we cannot officially advocate recruiting seamen from developing nations, we hope to increase the mix of nationalities on Japanese vessels.″

The ministry report estimated the operating cost of a ship with a full crew of seamen from developing nations at slightly more than $300,000 a year compared to $2 million a year for full-time Japanese seamen.

The report also advocated measures to help unemployed seamen find new jobs and further scrapping of surplus ships. Japan scrapped 1.88 million gross tons in fiscal 1986 in an attempt to adjust the supply of tonnage to falling demand.

The ministry has set a target of 50 million gross tons for its merchant shipping fleet, slightly lower than the 55.47 million gross tons recorded in mid-1986, the report said.

Japan’s shipbuilding industry has also made sharp cutbacks in its work force.

Nozaki strongly criticized protectionist practices of other nations which he says have put Japan at a competitive disadvantage.

″A number of developing nations use a ‘cargo reservation system’ to guarantee that a certain part of their imports and exports are carried by their own ships,″ he said. ″Japan maintains absolutely free trade in shipping and considers this practice unfair.

″But even the U.S. government reserves about one-third of its own military and overseas aid cargo,″ Nozaki said. He said U.S. subsidies to its shipping industry, which he estimated at $200 million to $300 million annually, far outweighed Japanese assistance to its own shipping sector, which he said totaled about $47 million last year.

Japan plans to urge developing nations to rectify unfair trading practices, the ministry report said.

″Shipping talks will be held with trading nations at various governmental and private levels to seek policy coordination in shipping,″ the report said. But if the talks fail, Japan will consider taking necessary measures to counteract restrictions on the activities of Japanese shipping companies, it said.

Japanese ships carried 19.8 percent of the world’s oceangoing cargoes in 1986 on a basis of tonnage, and 25.7 percent of the total on a basis of tonnage and mileage, the report said. Less than half of all Japanese-owned vessels fly the Japanese flag - others are registered under Panamanian or Liberian flags of convenience, it said.

According to the U.S. Maritime Administration, Japan ranked third behind Liberia and Panama as of early last year in the total capacity of merchant ships under its flag.

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