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ECONOMY > External Relations

U.S., Japanese companies to benefit from Trump administration’s tax cuts

By Takeshi Kawanami in Washington and Mariko Hirano in New York

 

In reaction to the major tax cuts decided by the Trump administration late last year, U.S. companies are quickly making vigorous moves to invest in the U.S. and increase employment. Apple announced domestic investments of $30 billion (approximately 3.3 trillion yen) on Jan. 17, and more than 100 companies have made decisions to increase employment and wages in light of the Trump tax cuts. While President Donald Trump advertises this as an achievement, there is also the possibility that the economy may overheat, thus resulting in further monetary tightening.

 

Among Japanese companies, Toyota Motor, whose operating profits in North America make up 15% of its total profits, is likely to benefit substantially from the tax cuts. Active capital investments in the U.S. will mean increased demand for industrial machinery, which will help improve business results for Japanese companies.

 

However, unemployment in the U.S. is down to 4.1% for the first time in 17 years, approaching full employment. A tighter labor market may result in inflation, prompting the FRB to raise interest rates and in turn, slowing down the economy.

 

Trump asserts that the major tax cuts will push the growth rate up by 3%. However the return of companies and money to the U.S. may result in the hollowing out of industry in neighboring countries, thus running the risk of intensified trade friction. (Abridged)

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