I was asked by the LA Times to comment on the impact of Brexit on medium-term and long-term trade between the UK and Japan. The UK has benefited from massive investment by Japanese companies bringing their European HQ here and there have been unprecedented levels of M&A activities from Japan in recent years, specifically to gain more global market share. Not all of this market share has been tied to the EU but every single Japanese company I speak to quotes the significance of the UK’s membership of the EU as their decision to invest here. Although it is far too early to predict anything at a very uncertain time, I could tell the Times that from working with and talking to the Japanese business community in the UK at various levels, they were extremely worried about a Brexit and how it would affect their access to European Markets as well as knowing there would be uncertainty on an unprecedented scale following it.
Given the Japanese aversion to change and unpredictability, the Brexit has caused shockwaves amongst the Japanese business and diplomatic community in the UK. It also caused the Nikkei to plunge to the lowest level in 5 years, shares in Japanese companies in the UK dropped and the Yen surged prompting the Japanese Finance Minister to issue a statement that they would intervene where necessary to off-set the affects of this on their currency and Japanese exports.
There is also the issue of the Japan EU Trade Partnership that is currently being negotiated. It is too early to say whether this will continue and whether it will bring more advantages for European companies wanting to trade with Japan. However, British investment in Japan could stay strong if we can negotiate a separate deal with Japan. We are mostly dealing with the unknowns at the moment- a situation that risk-averse Japan is very nervous about.
On a positive note, there are elements of the Japanese way of doing business that make me feel confident that we will continue to enjoy positive trade with Japan. Most Japanese businesses have long-termism at their core and recent inward investment from companies such as Hitachi Rail in the UK have built upon long-term relationships and were made with the intention of being here for the long run come what may. This will hopefully be the key to what will happen with most Japanese companies in the UK-long-termism along with a propensity to caution and dislike of change will hopefully mean they won’t jump ship straight away and may stick around long enough to support us keeping the UK economy strong and competitive.