TOKYO, Feb 19 (Reuters) – Nearly 90% of Japanese companies expect U.S. President Donald Trump’s policies to negatively impact business, according to a Reuters survey released on Thursday. This marks a clear sign of mounting concern in the United States’ top foreign direct investor.
The survey highlights how the prospect of higher tariffs and increased trade friction between the United States and China has clouded the outlook for companies in Japan, the world’s fourth-largest economy. Japan, a staunch U.S. ally, heavily relies on China as both a manufacturing base and a key market for its machinery and other exports.
Approximately 86% of respondents stated that Trump’s policy measures would have an adverse or somewhat adverse effect on their business environment, with the remaining respondents expecting a positive or somewhat positive impact.
In a similar survey conducted in December, 73% indicated that Trump’s second term in the White House would harm their business environment. Among the firms that viewed Trump’s policies negatively, 72% cited his trade strategy, including the imposition of more tariffs, as the most detrimental factor, while 26% pointed to deepening friction between the United States and China.
“Ratcheting up protectionism has nothing but a negative effect on the global economy,” commented a manager at an information services firm.
Trump has already announced 25% tariffs on steel and aluminum imports, imposed 10% tariffs on goods from China, and threatened Canada and Mexico with steep tariffs, which are currently on a 30-day hold. He has also instructed his economics team to devise plans for reciprocal tariffs on every country that taxes U.S. imports and to counteract non-tariff barriers. While Japan does not impose tariffs on cars, the U.S. government has stated that various non-tariff barriers impede access to Japan’s automotive market.
On Tuesday, Trump threatened tariffs “in the neighborhood of 25%” on auto imports as soon as April 2. An official at an electronics company warned that if the auto industry took a hit from tariffs worldwide, semiconductor sales could also be affected.
Deregulation Seen Positively
Among the firms that viewed Trump’s policies positively, 37% cited deregulation and tax cuts as the most beneficial factor, while another 37% pointed to his policy to boost fossil fuel production.
Regarding their business operations and investments in the United States, 16% of respondents said they were adopting a more cautious stance, while 80% said they had no plans for change.
During his first in-person meeting with Japanese Prime Minister Shigeru Ishiba this month, Trump encouraged Japan to invest in U.S. energy and technology and sought a resolution to a dispute over Nippon Steel’s $14.9 billion bid for U.S. Steel. Trump stated that Nippon Steel was now considering an “investment, not a purchase,” which he found acceptable. Japan’s top government spokesperson Yoshimasa Hayashi later mentioned that the steelmaker was contemplating a bold change in its plan from seeking an acquisition.
The survey, conducted by Nikkei Research for Reuters, reached out to 505 companies, with 233 responding anonymously.
Rate Hike Impact
Regarding the Bank of Japan’s recent rate hike, 61% of respondents deemed it appropriate, while 25% believed the step was taken too early and 15% regarded it as too late. The BOJ raised interest rates to 0.5% from 0.25% in January, believing Japan was on the verge of sustainably achieving its 2% inflation target.
“The yen’s excessive weakness caused the continued outflow of national wealth. To arrest the trend, further interest rate hikes are in order,” a manager at a wholesaler said.
When asked about the ideal timing for the next rate hike, 24% selected the July-September quarter this year, another 24% chose “next year or later,” and yet another 24% indicated that rate hikes were not desirable at any time.
BOJ board member Naoki Tamura stated this month that the central bank must raise interest rates to at least 1% by the second half of the fiscal year beginning in April. About 44% of survey respondents said an interest rate increase to 1% would adversely affect their capital spending, while 21% said rate hikes beyond 1.5% would have that effect.
“In parallel with rate hikes, we want the government to expand measures to facilitate capital spending,” an official at a rubber manufacturer said.
