Japanese supply chain's missing links

'Bankruptcy Street.'

Ri-ichiro Suzuki with his coffee maker.

The steel parts Suzuki's making that'll be used in the New York City subway system.

Norihisa Degawa.

Kai Ryssdal: Tomorrow's going to be two weeks since the earthquake in Japan. In between stories about the spreading effects of the nuclear crisis and how to rebuild after devastation like that, we've all learned how critical Japan was to a smoothly running global economy.

Note the past tense, there, because the global supply chain has proven to be surprisingly fragile. Today as we explore the economic effects of the disaster, Marketplace's Rob Schmitz explains exactly how fragile it is.


Rob Schmitz: In South Tokyo, there's a street. It cuts through the middle of a gritty, blue-collar neighborhood of tiny factories wedged between tiny homes and tiny playgrounds. Locals call it 'Tosan Dori': 'Bankruptcy Street.' Whenever Japan gets hit with an economic crisis, the factories along this street are always the first to go. Today, Bankruptcy Street is quiet.

Ri-ichiro Suzuki: I have no work, nothing. In the past couple of weeks, I've worked maybe three hours.

Ri-ichiro Suzuki is a welder with nothing to do -- something he shares in common with a few of his neighbors. They're former factory owners who've gone bankrupt in Japan's economic slump. They sit inside Suzuki's garage around his makeshift coffeemaker: a welding gun shooting a flame under a piece of scrap metal. A few cans of vending machine coffee rest on top, warming up.

Suzuki calls out to a friend who walks by the garage. Suzuki grew up on Bankruptcy Street. He knows everyone, even the neighborhood's stray cats. They wander in and out aimlessly.

But Suzuki's connections extend beyond Bankruptcy Street. If you happen to live in New York City, he's connected to you, too. You know that subway station that's out of service? You'll have to wait a little longer now. That's because Suzuki makes the small steel parts that hold New York's subway tracks together. These parts are lying all over his shop, going nowhere. He usually makes 100 of these a week. Last week, he made four.

Suzuki: I've been waiting for the raw materials to make these parts. I have a deadline to meet, but everything's delayed due to the earthquake. So I'm just sitting here, waiting for the metal to be delivered.

Steel from the north of Japan can't get to Suzuki. Suzuki can't make the parts for Hitachi. And Hitachi can't send the parts to New York. The global supply chain breaks down with the removal of just one link.

Toshinori Nemoto: Japan's global role is to provide precision parts and components to assembly plants all over the world, but now these parts makers can't move their products.

Hitotsubashi University professor Toshinori Nemoto studies Japan's global supply chain.

Nemoto: In the course of rearranging their supply chain, multinational companies may start excluding Japan and turn instead to China. Chinese companies are now able to make high quality products, so this is a golden opportunity for them.

And this has a familiar ring for the factories along Bankruptcy Street. Norihisa Degawa's tiny factory makes rubber stoppers for trucks manufactured by Japan's largest automakers. But he says you can't rely on those companies anymore.

Norihisa Degawa: Carmakers like Toyota don't care about their suppliers now. Our government's the same. All they care about are profits. And that's why they're going after cheaper suppliers overseas. Years ago, all you needed to do was step out of the train station our neighborhood and you could get any auto part you wanted. But most of those parts makers, who are friends of mine, have gone out of business.

Degawa's father started this factory nearly 50 years ago. Degawa says he's thinking of closing the business for good pretty soon. He says this neighborhood has changed. It's so quiet now, he says. He misses the days when this street was loud and busy, when everyone here was working, sharing in Japan's growth in his own little way. Back then, nobody had even heard of a place called Bankruptcy Street.

In Tokyo, I'm Rob Schmitz for Marketplace.

About the author

Rob Schmitz is Marketplace’s China correspondent in Shanghai.

Ri-ichiro Suzuki with his coffee maker.

The steel parts Suzuki's making that'll be used in the New York City subway system.

Norihisa Degawa.

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