A recent survey conducted by Reuters indicates that a growing number of Japanese companies believe a presidency under Kamala Harris would be more beneficial for their operations compared to a potential second term for Donald Trump. This reflects concerns among respondents about the implications of protectionism and erratic policies.
As countries around the globe keep a close eye on the upcoming U.S. presidential election, Japan, a key ally of the United States with a significant presence of U.S. troops, is particularly sensitive to the economic fallout of a potential renewed trade conflict between the U.S. and China, both vital trading partners.
The survey revealed that 43 percent of the responding Japanese firms favor Harris due to her alignment with their corporate strategies, while only 8 percent prefer Trump. Meanwhile, 46 percent expressed that either candidate would suffice, and 3 percent indicated no preference for either.
Concerns are prevalent that a second Trump administration could lead to heightened trade tensions and economic friction, prompting significant shifts in business strategies, as highlighted by a manager from a ceramics company. The Trump administration’s previous dealings often strained relations with Japan, particularly in terms of defense spending and trade disputes.
In contrast, a representative from a chemicals company expressed the belief that a Harris administration would maintain existing policies, offering greater predictability for businesses moving forward.
Regarding potential adjustments needed if Trump were to win, 34 percent of companies noted that they would need to revisit their foreign exchange strategies, while 28 percent would realign supply chains, and 21 percent suggested reducing operations in China. Trump’s previous suggestions of imposing a universal tariff on U.S. imports and significantly increasing tariffs on Chinese goods have contributed to these concerns.
With respect to operations in China, the survey also uncovered that 13 percent of Japanese companies are contemplating reducing their activities there, while only 3 percent are considering expansion. Among those looking to scale back, reasons included a lack of economic recovery prospects, intense price competition, and economic security risks.
Japan’s significant firms like Honda Motor and Nippon Steel have already announced plans to reduce their operations in China, which has faced economic growth challenges and slowing export performance.
Additionally, the survey revealed that 24 percent of respondents deemed recent interventions in the foreign exchange market by Japanese authorities as appropriate, while 9 percent disagreed and 64 percent considered them unavoidable, particularly as the yen struggled earlier in the year, reaching lows not seen in nearly four decades.
When discussing the possibility of the Bank of Japan raising interest rates to bolster the yen, 51 percent indicated that such a move should only occur under extreme exchange rate fluctuations, while 22 percent opposed monetary policy changes aimed at influencing the foreign exchange market.
Expectations regarding the yen suggest a range of forecasts, with 32 percent anticipating it to trade between 145 and 150 yen per dollar by year-end, and 25 percent predicting a slightly stronger position between 140 and 145 yen. The yen has shown volatility during the survey timeframe, demonstrating both strength and subsequent weakening.