business

Japanese firms wary of boosting investment amid intensifying trade war

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By Tetsushi Kajimoto

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The title is; “Japanese Firms Wary” but the article does not support this.

Some 52 percent of respondents said they would not change their capital spending amounts next fiscal year versus this year, whereas 12 percent said they would cut. Meanwhile, 22 percent planned to increase investment, and 14 percent said they would do likewise but only moderately.

So 89% will maintain or increase capital spending. So why the focus on China-US relations when about 90% will continue or increase investments in 2019?

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Mike. That is a great question.

Exports in Japan account for less than 20% of GDP. Typically speaking, Japan is a relatively closed market. Which means that outside activity normally should not factor into company activities at home. However, Japan is not a typical country. Like many other countries that have a globally traded currency, the strength of your currency is dictated by the activities outside of your home market. That means the strength of a currency can heavily affect your home company's profit and loss as well as purchasing power.

Also, 8 of the top 10 Japanese companies operate on a global scale. When the outside market is not doing well, it means that many of those companies will also scale back activities in their home country and that will also affect the home economy. When a company is losing money in one sector it make cut expenses in another sector or area in order to offset those things. So if companies such as Mitsubishi or Canon are getting hit hard outside of the country, this could lead to huge decrease in spending on the home front as well as cutting jobs globally as well as the home front. Especially when the issue is concerning two major areas of operations for most global companies in Japan.

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