The small factories in the western Japanese city of Higashiosaka for decades fuelled the thundering rise of the country's biggest brands - but a weak yen and rising costs have accelerated a slow decline, and are reshaping the industrial heartland.

Home to about 6,000 firms, 87% of which have fewer than 20 employees, the city is emblematic of how such forces are pushing Japan's small manufacturers toward a tipping point.

The workshops in Higashiosaka create metal components for everything from train seats to ballpoint pens, and have long relied on powerhouses such as Sharp, Panasonic, and Sanyo for orders.

Now Sanyo is gone, acquired by Panasonic. Work in general has dried up in recent years in the face of competition with South Korea and China; when Taiwan's Foxconn acquired Sharp in 2016, it moved much of the company's manufacturing out of Japan.

The amalgam of issues that Higashiosaka faces – an ageing population, offshoring, and a sagging currency - mirror the problems that have been chewing at the foundation of the world’s third-largest economy and its global exports, which hit 83.1 trillion yen ($610.54 billion) last year.

For these companies, weathering the economic storm isn't just about surviving, but preserving the industrial ecosystem.

Small- and medium-sized enterprises account for 99.7% of companies and 68.8% of employment in Japan. But these same companies represent only 52.9% of the economy, according to a 2016 government survey, the most recent data available.

The region around Higashiosaka has a history as a manufacturing hub dating back hundreds of years. The city still has industrial enclaves where tiny factories are wedged between houses, hammering, sawing and shaping metal from early morning to dusk. ...continue reading