(Bloomberg) – Japan has earmarked $ 2.2 billion of its record-breaking stimulus package to help its manufacturers move production out of China as the corona virus disrupts supply chains between key trading partners.

The additional budget that has been put together to offset the devastating effects of the pandemic includes 220 billion yen (US $ 2 billion) for companies that are moving their production back to Japan and 23.5 billion yen for those who are producing plan to relocate to other countries.

The move coincides with what should have been a celebration of friendlier relations between the two countries. Chinese President Xi Jinping should be on a state visit to Japan earlier this month. But what would have been the first visit of this kind in a decade was postponed a month ago due to the spread of the virus, and no new date was set.

China is Japan’s largest trading partner under normal circumstances, but imports from China fell almost half in February as the factories closed due to disease, which in turn starved Japanese manufacturers of the necessary components.

This has resumed the discussion about Japanese companies reducing their dependence on China as a manufacturing base. The government’s governing body for future investments last month discussed the need to relocate high-value-added products back to Japan and to diversify the production of other goods across Southeast Asia.

According to the panel, Japan exports a much larger proportion of parts and partly finished goods to China than other large industrial nations. A survey by Tokyo Shoko Research Ltd. of February found that 37% of the more than 2,600 companies that responded diversified sourcing to locations other than China in the coronavirus crisis.

It remains to be seen how politics will affect Prime Minister Shinzo Abe’s long-standing efforts to re-establish relations with China.

“We are doing our best to resume economic development,” Foreign Ministry spokesman Zhao Lijian said in Beijing on Wednesday when asked about the move. “We hope that other countries in the process, like China, will act and take appropriate measures to ensure that the world economy is affected as little as possible and that supply chains are affected as little as possible.”

The story goes on

The early stages of the Covid 19 outbreak in China seemed to warm the often cool relationship between the two countries. Japan provided help in the form of masks and protective gear – and in one case a delivery was accompanied by a fragment of ancient Chinese poetry. In return, it received praise from Beijing.

In another move welcomed in Japan, China announced Avigan, a subsidiary of Japan’s Fujifilm Holdings Corp. antivirus program, for an effective treatment of the coronavirus, although it has not yet been approved for this use by the Japanese.

Still, many in Japan tend to blame China for abusing the early stages of the outbreak and Abe not to block visitors from China earlier.

In the meantime, other problems that have deeply divided neighbors – including a territorial dispute over the islands in the East China Sea that brought them close to a military clash in 2012-13 – have not been resolved.

Chinese government ships continued their patrols around the Japanese-managed islands during the crisis. Japan said four Chinese ships entered the country’s territorial waters on Wednesday.

(Updates with comment from the Chinese government in the eighth paragraph)

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