"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 [1]. Before the Fender Squier series were introduced in 1982, Fender was making lower priced guitars such as the Fender Lead series at their Fullerton California plant. 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. The lower priced Fender guitars were made in America and could not compete with the lower prices of Japanese made Fender copies. In the early 1980s, Japanese labor and production costs were much lower than in America and to compete with the Japanese made guitars, Fender moved the lower priced Fender guitar production from America to Japan.

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. Yamano Gakki are also known for once being part of Epiphone Japan. Kanda Shokai own the Greco brand name and one of the conditions of the Fender Japan agreement was that Kanda Shokai cease production of its own Greco Fender copies.

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. Tokai was seriously considered to start building the first Japanese made Fenders but after a breakdown in negotiations, FujiGen Gakki was chosen instead

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