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Fender were also losing sales in Japan to Japanese guitar brands such as Tōkai, Greco and Fernandes, and the establishment of Fender Japan would benefit Fender sales in Japan as well as overseas.
Fender began negotiations with several Japanese musical instrument distributors and reached an agreement with Yamano Gakki and Kanda Shokai to establish Fender Japan.
This arrangement benefited Fender because it removed the Greco Fender copies from the Japanese market which were selling in Japan at much lower prices than the American made Fenders and it also benefited Kanda Shokai because Kanda Shokai could then distribute Japanese made Fender branded guitars in Japan.
Further negotiations between Fender and Japanese guitar factories were done.
History Fender, under the ownership of CBS, acquired the Squier brand name in 1965 when it bought a USA based string making firm, but it lay dormant for many years .
Until the introduction of the Fender Squier series, Fender had never produced lower priced guitars based on their main Stratocaster and Telecaster designs and had always used different model designs for their lower priced guitars.
In the late 1970s and early 1980s Fender was facing competition from lower priced Japanese made guitars.