Last June, Akio Toyoda, president of Japan’s Toyota Motor, delivered a blunt appraisal of his country’s most cherished economic asset: its competitiveness as a manufacturing power. “If you look at it logically,” he said as he announced a reorganisation of the carmaker’s domestic operations, which were haemorrhaging money as a result of a soaring yen, “it doesn’t make sense to manufacture in Japan.”

Alarm bells are ringing in the offices and factories of Japan Incorporated. The currency, electricity shortages caused by last year’s tsunami, unfavourable tax and trade policies and the relentless rise of China and South Korea are heaping pressure on the country’s once unchallenged makers of cars and electronics to decamp for lower-cost locations. Politicians, business leaders and the media warn that, if nothing is done, the industries responsible for much of Japan’s postwar growth could fall into irreversible decline – and drag the country’s chances of pulling itself out of a 20-year economic malaise with them. “We are in unprecedented danger of hollowing out,” Yoshihiko Noda, prime minister, said in September.

Handwringing over the decline of manufacturing is not entirely new, nor is it unique to Japan. The share of the workforce involved making physical objects, as in other wealthy countries, has been shrinking for years: from 27 per cent in 1970 to 17 per cent today. That has left it somewhere between the UK and the US, where only one in 10 workers is in manufacturing; and Germany and Italy, where the figure is about 20 per cent, according to statistics collected by the Paris-based Organisation for Economic Co-operation and Development.