Nearly three-quarters of Japanese companies anticipate negative business impacts from a second Donald Trump presidency, citing potential tariff increases and escalating U.S.-China trade tensions as primary concerns, according to a recent Reuters survey.
Trump’s return to the White House is marked by threats of substantial tariffs, exceeding 60%, on Chinese imports. Economists polled by Reuters predict these tariffs could be implemented as early as next year, with estimates ranging from 15% to 60% and a median projection of 38%. Beyond China, Trump has also threatened 25% tariffs on goods from Canada and Mexico, impacting Japanese automakers with factories in those countries. This uncertainty creates challenges for Japanese businesses planning long-term investments. One respondent, a manager at a machinery manufacturer, highlighted the difficulty in making investment decisions due to the unpredictable nature of Trump’s policies.
While 73% of surveyed companies express concerns about a negative business environment under a second Trump term, the remaining respondents anticipate positive outcomes. They cite potential benefits from increased U.S. domestic demand driven by tax cuts, along with possible revisions to energy and environmental policies.
In response to potential tariff hikes, two-thirds of the surveyed companies indicated their business strategies would likely remain unchanged. However, 22% plan to implement cost-cutting measures, and 8% intend to expand their presence in markets outside the United States. The survey, conducted by Nikkei Research for Reuters between November 27 and December 6, 2024, gathered responses from 236 of 505 contacted companies, all of which participated anonymously.
Despite widespread apprehension regarding a second Trump presidency, half of the respondents project increased earnings in the upcoming financial year. Approximately 20% anticipate a year-on-year decline, while the remaining respondents expect earnings to remain relatively stable. This optimism is partially fueled by recent financial performance. An analysis by the Nikkei business daily revealed a 15% increase in combined net profits for approximately 1,000 Japanese listed companies during the first half of the fiscal year.
Several sectors contributed to this positive trend. Banks benefited from interest rate hikes, while shipping companies experienced growth due to increased freight rates. Additionally, the tourism sector, including hotels and railroad operators, saw a surge in inbound tourism.
Looking ahead, approximately 60% of survey respondents predict the dollar-yen exchange rate will settle between 140 and 150 yen by 2025. The yen has faced sustained pressure due to the significant disparity between high U.S. interest rates and Japan’s near-zero rates. While the yen reached a four-decade low against the dollar in July, recent government intervention and adjustments to Japan’s monetary policy have contributed to a rebound.
Regarding the Bank of Japan (BOJ), slightly over half of the respondents expressed confidence in Governor Kazuo Ueda’s ability to normalize monetary policy following the end of negative interest rates in March. In contrast, 24% hold unfavorable views of Ueda’s capabilities in this regard. Following the BOJ’s July rate hike to 0.25%, over half of economists polled by Reuters anticipate a further rate increase in the near future.
