Japan Inc’s dilemma: Hopeful but worried on Trump leadership
tokyo — US President Donald Trump’s salvos on trade and currency are rattling Japan Inc, but many here hope Prime Minister Shinzo Abe can sell him a “winwin” package of job creation and investment when they meet this week, averting a return of the Japan-bashing of the 1980s.
Abe moved early to build a personal rapport with Trump, meeting him in New York shortly after he was elected. With Japan’s largest export market at stake, its businesses need him to keep at it.
Japan’s status as the cornerstone US ally in the Pacific was reassuringly reaffirmed in a recent visit by US Defence Secretary Jim Mattis. Tokyo has reiterated its commitment to spending more on its own security and buying more military aircraft and other equipment from the US.
That won’t directly affect trade figures, however, which are measured by the private sector.
Japan logged the second-largest trade surplus with the US last year, at $68.9 billion. That’s way below China’s, at $347 billion, and on a par with the surpluses run by Germany and Mexico. Still, there’s plenty to worry about. After taking office, Trump pulled the plug on US involvement in the Trans-Pacific Partnership, then a dozen, now 11-member trade pact the Obama administration promoted as a way to expand US exports and influence in the Pacific Rim and counter China’s growing economic sway.
Trump has criticised Toyota Motor for planning to build an assembly plant in Mexico, complained Japanese don’t buy enough US-made cars, and accused Japan of engineering its monetary policies to help Japanese exporters.
Abe did not travel with any business leaders during his trip, which began on Thursday. But following the lead of Softbank tycoon Masayoshi Son, who met with Trump in November and promised 50,000 jobs and $50 billion in new investments, officials say they are hammering out a job-creation package of infrastructure investments to propose during Abe’s visit.
According to various versions of the proposal reported in Japanese newspapers, key areas of investment may include building highspeed trains, joint development of robotics, artificial intelligence and space technologies and ramping up imports of US natural gas in Japan and elsewhere in Asia by building more liquefied natural gas facilities on this side of the Pacific. Resourcepoor Japan imports almost all its energy needs since most of its nuclear reactors were shut down after the 2011 Fukushima nuclear disaster. But price and currency trends can blunt any impact on the trade balance: in 2016, Japan’s imports of liquefied petroleum gas from the US jumped nearly 44 per cent by volume, but the value of those imports fell slightly.
Japanese businesses have in general been supportive of so-called “Abenomics”, the prime minister’s attempts to keep Japan’s growth going. And they are applauding his effort to woo Trump. Trump’s policies also could herald new opportunities for Japan to invest in the US, analysts say.
The US is already the top destination for Japan’s direct foreign investment, totalling $460 billion last year, more than in Europe at $398 billion, or all of Asia at $376 billion, according to Hiromichi Shirakawa, an analyst at Credit Suisse.
Currency rates are critical for Japanese manufacturers and other businesses that earn a large share of their revenue overseas: Every ¥1 rise against the dollar erases about ¥40 billion (about $3.6 million) in Toyota’s operating profits.