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‘Trade war’ overtakes China as worry for Japan CEOs, Nikkei survey of 100 major companies

Nikkei staff writers


TOKYO — Heightened trade tensions are clouding the business outlook of Japanese companies, with two-thirds of chief executives citing protectionism as a risk to the global economy in a new Nikkei survey. 


Leaders of 145 major companies responded to the latest quarterly poll, conducted June 7-25.


The spread of protectionist policies was cited by 67.6% as a risk to the global economy in 2018 — twice the percentage found by the March survey.


By contrast, the top two concerns in the previous poll  — a slowing Chinese economy and political deadlock in the U.S. — trailed at 40.7% and 36.6%, respectively.


In June, U.S. President Donald Trump expanded steel and aluminum tariffs from Japan and other trading partners to the European Union, Canada and Mexico, which had enjoyed a reprieve. China and the EU are taking retaliatory steps against U.S. exports, including soybeans and Harley-Davidson motorcycles.


While Japanese business leaders were generally optimistic about the state of the world economy six months ahead, with 79.3% expecting it to expand, the share declined slightly after a long upward streak. Meanwhile, 2.8% predicted the economy will be slowing mildly by then, up from zero in the last survey.


“Capital spending has been solid, but if protectionism strengthens it will have a negative impact on manufacturers’ investment appetite,” said Kazuyuki Inoue, president of construction company Shimizu.


Of those who saw U.S. protectionism as a risk, 80.3% said it could cause global economic instability. Other reasons given included breakdowns in U.S-China relations (46.2%) and transatlantic ties (30.8%).


A drop in global trade volume was among the concerns listed by MS&AD Insurance Group Holdings CEO Yasuyoshi Karasawa.


Japan’s trade surplus with the U.S. grew 5.7% to around 7 trillion yen ($63.4 billion) in fiscal 2017. For now, trade tensions have had no visible impact on Japanese corporate earnings. But multinationals, particularly exporters, still face risks. German automaker Daimler has downgraded its 2018 profit forecast in light of the U.S.-China trade frictions.


A potential 25% tariff on Japanese automobiles and autoparts — Trump recently threatened a 20% levy on European cars — would translate to at least 2.2 trillion yen in costs, according to the Daiwa Institute of Research.


In response to protectionist measures, 64.1% of the executives said Japan should work with the EU and others to persuade the U.S. to remove them, while 22.8% favor bilateral talks. A fifth of respondents agree with taking the issue to the World Trade Organization in coordination with the EU and others.

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