Daily Management Review

Abe, Trump Don't Want to see Excessive Yen Weakness, Japan Inc Believes: Reuters Poll


01/23/2017




Abe, Trump Don't Want to see Excessive Yen Weakness, Japan Inc Believes: Reuters Poll
A Reuters poll showed that any significant weakening of the yen is worrying the Japanese companies and they believe that it could spark an unwelcome political backlash but they they also believe that neither U.S. President Donald Trump nor Japan Prime Minister Shinzo Abe want to see that happening.
 
While nearly a third cited national security concerns as the most pressing issue Abe should bring up with the new president, Japanese firms want Abe to push Trump hard on trade issues, the Reuters Corporate Survey, conducted Jan. 4-17, also found.
 
With his protectionist agenda casting a cloud over the outlook on global trade, the latest survey highlights caution over how U.S. policy will develop under Trump, who was sworn in as president on Friday.
 
Trade relations with China are being hurt by the dollar's strength, Trump has complained. Threatening to levy punitive tariffs on Chinese imports and renegotiate the North American Free Trade Agreement with Mexico and Canada, he has also vowed to make sweeping changes to U.S. trade policy and protect American jobs.
 
90 percent saw 125 yen as a red line while 73 percent said that Trump would not tolerate the dollar rising beyond 120 yen, found the monthly poll of 531 big and mid-sized companies.
 
"I think the U.S. will try to arrest excessive strength in the dollar in order to promote protectionism," wrote a manager at a machinery company.
 
Managers answered on condition of anonymity in the survey, which was conducted for Reuters by Nikkei Research. Around 240 answered questions on Trump.

On expectations that fiscal stimulus proposed by Trump would boost growth and inflation and lead to accelerated U.S. interest rate hikes, the dollar surged at the end of last year. But after Trump complained about dollar strength, the greenback fell to six-week lows against major currencies last week. For running trade surpluses with the United States, he has criticized Japan as well as China and Mexico.
 
"Given the irregularity of Trump's remarks, many companies seem to worry about when a weaker yen becomes the target of his criticism," said Hidenobu Tokuda, senior economist at Mizuho Research Institute, who reviewed the survey results.
 
Because it boosts repatriated income from abroad, a weaker yen helps Japan's exporters. However prices of imports such as oil and food that can hurt households are also lifted by it.
 
When the dollar rose to around 125 yen in mid-2015, Bank of Japan Governor Haruhiko Kuroda warned of a potential hit to households. And hence the belief that Tokyo won't tolerate a dollar rise above that level, known as the "Kuroda line", has strengthened after that comment.
 
In order to avert protectionism, Trump should be pressurized on multilateral trade pacts such as the Trans-Pacific Partnership (TPP) and NAFTA by Abe, desire 31 percent of firms who took part in the survey.
 
Amid concerns over Trump's criticism of Japan for being a free rider on the bilateral alliance, another 31 percent urged Abe to push Trump to maintain the U.S.-Japan security ties. Thirteen percent called for efforts to keep China in check.
 
"TPP and the free trade framework are vital," said an official at an electrical machinery firm," but our utmost concern is geopolitical risks when promoting trade."
 
(Source:www.reuters.com) 






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