Japanese investment in US to power ahead

{"text":[[{"start":5.6,"text":"Japanese investment in the US will power ahead as domestic companies look to the world’s biggest economy to counter slowing growth at home and a mass retreat from China, bankers predict."}],[{"start":16.64,"text":"The east Asian nation has been the top investor in the US for seven consecutive years, according to the Japan External Trade Organization (Jetro). The size and robust growth of America’s $32.6tn economy have made it the natural choice for Japanese companies as they withdraw from China and Russia."}],[{"start":36.045,"text":"Bankers and lawyers say there is little on the horizon that will halt or slow the trend, even as concerns swirl over tariffs, the weak yen, growing pressure from the government to invest in the Japanese economy and potential delays to deals following the Democrats’ victory in the US midterms."}],[{"start":51.92,"text":"“Japanese corporates and financial institutions have a long track record of investing in the US and their interest is likely to continue,” says Teppei Takanabe, co-head of Japan investment banking at Goldman Sachs. “The combination of growth and macroeconomic stability that the US offers makes it a uniquely attractive market globally.”"}],[{"start":75.04,"text":"The $550bn investment scheme that Tokyo last year agreed with the US in return for lower tariffs — still at 15 per cent — also adds a state-led push to further accelerate investment in America."}],[{"start":85.12,"text":"The US has ranked first for four years in a row by Japanese companies as a destination for business expansion in surveys conducted by Jetro, while climbing to second place behind India in the latest survey by the Japan Bank for International Cooperation (JBIC)."}],[{"start":100.78,"text":"Japanese companies have been closing their China businesses in record numbers as they have been squeezed by a slowdown in their neighbour’s economy, US tariffs and a diplomatic rift between Tokyo and Beijing, according to Teikoku Databank, a Tokyo-based data provider."}],[{"start":114.892,"text":"Alongside India, the US is seen as one of the few markets where protectionist policies will help keep Chinese competitors at bay, offering a safe haven for Japanese manufacturers."}],[{"start":124.737,"text":"“Some level of protectionist industrial policy will be here to stay,” says William Chou, a Japan expert at the Hudson Institute, a Washington-based think-tank."}],[{"start":133.12,"text":"On top of Japan’s slowing economy and shrinking population, bankers and lawyers say that the persistently weak yen is adding to the urgency for the country’s companies to further expand their global presence — even as deals become harder to pull off."}],[{"start":149.83,"text":"“A negative factor is the very weak Japanese yen, as it’s very expensive from the Japanese yen perspective to invest in the US,” says Hideaki Roy Umetsu, New York managing partner for Japanese law firm Mori Hamada, which plans to open offices in Dallas and Houston. “But if they can get earnings in US dollars from the US that means a lot for the bottom line.”"}],[{"start":172.07,"text":"Even as the appetite to invest more in the US shows little sign of abating, Japanese investments in America are facing new kinds of restrictions from Donald Trump’s administration."}],[{"start":184.88,"text":"Nippon Steel’s $15bn acquisition of US Steel, which was on the brink of collapse under Joe Biden, was salvaged by Trump but with a golden share that granted the US government the power to veto key decisions. Commerce Secretary Howard Lutnick later said its approach would be “noses in, fingers out”. In other words, the government was there to set boundaries on issues of national security."}],[{"start":206.193,"text":"Umetsu argued that this was to the advantage of Japanese companies as the stronger investment screening processes have squeezed out Chinese rivals from M&A auctions."}],[{"start":216.72,"text":"The $550bn investment scheme between Washington and Tokyo is another example of a policy that represents risk as much as opportunity for Japanese companies."}],[{"start":226.709,"text":"Under the framework, Japan finances projects and the US provides non-financial contributions, such as fast-tracking regulatory approvals, while private companies are selected as the operators."}],[{"start":237.986,"text":"Mireya Solís, an expert on the Japanese political economy at the Brookings Institution, says that the scheme highlights how “the Japanese government wants to use investment as their saving grace with the US government”."}],[{"start":250.521,"text":"Given that $827bn is the amount Japan has cumulatively invested in the US in its entire history, according to Jetro, many cast doubt on the feasibility of Tokyo ever getting close to fulfilling its $550bn commitment."}],[{"start":264.625,"text":"Indeed, Japanese groups, with the exception of SoftBank, have largely shown reluctance to get involved in the investment scheme. Many executives say it does not make financial sense because of limits on what they receive in exchange."}],[{"start":279.92,"text":"Katsuya Nakanishi, chief executive of Mitsubishi Corporation, Japan’s largest trading house, says the programme’s low-risk, low-return framework and lack of equity on offer are not aligned with its investment approach."}],[{"start":291.28,"text":"But Nakanishi defended purely commercial investment in the US, like its $7.5bn deal to buy gas producer Aethon this year, even as everything from energy to immigration policy has become more uncertain in the US."}],[{"start":305.631,"text":"“Where in the world is there a country you can trust?” asks Nakanishi, adding that energy assets are inherently exposed to potential regulatory and policy changes. “Has the US become higher risk? No, the US is the place with the lowest risks.”"}],[{"start":322.4,"text":"Despite political and trade uncertainties in the US, Japan’s top executives and advisers agree with Nakanishi and largely shrug off the risk."}],[{"start":329.771,"text":"They say uncertainty is not just rising in the US but also back at home. Some warn that Prime Minister Sanae Takaichi’s plan to revitalise the economy by focusing investment on 17 strategic sectors is commercially unsustainable."}],[{"start":343.84,"text":"More US investment is also likely to result in increased capital outflows, which senior Japanese investors warn will put downward pressure on the yen and come at the expense of domestic productivity."}],[{"start":355.244,"text":"Solís, of the Brookings Institution, says Japan’s business community is feeling frustration “in being pulled in so many different directions”."}],[{"start":365.153,"text":"“Resources are finite. There is a visible contradiction in having this major push to invest in the US and be pushing for capital to stay at home to build these [17 strategic] sectors,” she adds."}],[{"start":null,"text":""}],[{"start":376.96,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1794455902_4004.mp3"}