TOKYO (Reuters) – Three out of four Japanese companies expect the US-China trade franchises to last at least late this year, hoping a strong contrast to the market that presidents Donald Trump and Xi Jinping may soon enter into an agreement to close their harmful trade war, a Reuters survey found.
FILE PHOTO: Tokyo Akasaka business area is seen in Tokyo, Japan July 19, 2016. REUTERS / Toru Hanai / File Photos
And nine out of 10 believe that China's economic downturn will continue at least through late this year, and more than half predict the world's second largest economy will slow further by 2020 or more, showed the monthly Reuters Corporate Survey.
Japan's economic expansion under Prime Minister Shinzo Abe's stimulus policy is sputtering just as it is difficult to become the country's longest post-war boom, with export demand slumping into big markets, especially China.
The trade war between the global titans – Japan's main export markets – has already slowed down world trade, which is a blow to the export-related Japanese economy. Japanese manufacturers rely on customers in China to buy their products, especially those parts and equipment that come to China's factories and fuel their domestic and export growth.
Global financial markets have been raised by the hope that Trump and Xi could soon strike out a deal since Trump delayed a threatened March 1 farewell. Treasury Secretary Steven Mnuchin said last week that both sides were "working in good faith" to try to reach an agreement "as soon as possible."
Japanese companies already suffering from line damage are not optimistic about a quick fix.
"When it comes to tariff and trade disruption negotiations, they can be resolved by the end of the year. But if there is significant friction about hegemony, China and the United States will remain in doubt for 15-25 years, responding to a leader
"We hope that the trade war will not be a global downturn," wrote a steel manager.
The Reuters survey found that 31 percent of companies expect the commercial war to end in the second half of this year, and 45 percent say it will last until 2020 or longer.
Feeling the Pain
The company survey has found that Japanese firms are increasingly feeling squeezed from the trade friction in the US and China, although the overwhelming majority do not plan to move their business out of China
Compared to a similar survey in October, one-third of companies said they were affected by commercial gene, the latest study found that 52 percent were affected.
"The demand for electronic parts and cars is cooling, which we are afraid of, will dampen growth," wrote a chemist manager.
"Those who send goods to China and manufacturers in the country suspend or cancel investment plans," wrote a hardware manager.
Reuters Corporate Survey, conducted monthly for Reuters by Nikkei Research, polled 479 large and medium-sized businesses with managers responding to condition of anonymity. Around 230-243 answered the questions about trade and monetary policy.
The company's fear of damage from the commercial war and China's downturn is about to increase expectations that the bank in Japan will maintain its enormous stimulus for some time.
Those who want the central bank to relax its relief fell to 27 per cent from 45 per cent in a January 2018 survey, while the share will have it stick to two thirds from 49 per cent.
"The outlook is unclear due to the global downturn and the planned turnover tax at home. Now it's not time to change politics, even if there is a need to consider future features of exploring developments closely," one wrote head of a transport / tool company.
It has been six years since BOJ's governor Haruhiko Kuroda triggered an unprecedented outbreak of monetary stimulus in April 2013, with a promise to meet 2 percent inflation for two years.
But inflation has not been close to the target, and the risk of keeping policy too low for too long is rising.
Kuroda insists that hitting 2 percent inflation is a priority and an important way to stabilize prices, even though analysts and politicians are increasingly skeptical about the price target.
The company survey found to be roughly divided between Japanese companies to maintain the 2 percent target, even though the companies unanimously agreed that it was ambitious.
Half of the companies have a reduced view of Kuroda, suggesting that he is fighting for a losing battle to achieve the inflation target, as external pressure expands the effect of Abenomic's stimulus policy.
Asked whether confidence in Kuroda has changed since he took office in March 2013, the companies were grossly divided in their views, with 48 percent say confidence in the governor has lowered, 51 percent unchanged and only 1 percent say it has risen.
"I don't trust him," wrote a transport equipment maker leader.
"He has not only failed to achieve the goal of 2 percent, but also makes the timeframe to meet the price target ambiguous. It is bad."
Reporting Tetsushi Kajimoto; Further reporting by Izumi Nakagawa; Editing by William Mallard & Shri Navaratnam