TOKYO — Since Japan’s fiscal year starts in April each year, it is in May that the country's major corporations announce their financial statements for 2017. Most top Japanese companies have had notably great results. The net profits of Toyota and Mitsubishi, for example, hit new all-time highs for their three and ten-year results respectively. As the data of the last three weeks shows, the net profit of the 798 biggest Japanese firms listed on the Tokyo Stock Exchange rose by an average of 25%.
And yet even as these Japanese companies usher in a vibrant spring, I was also intrigued by a curious phenomenon — none of the CEOs of these Japanese enterprises offered even the slightest expression of happiness on their faces when they appeared in the press conference on TV news. Indeed, one sensed a shared sense of worry among them. Why is that?
It doesn't take long to figure out why. The economic climate is like the weather itself: Today may be a cloudless fine day, even as the weather forecast announces that a typhoon will arrive tomorrow. In brief, all these Japanese chief executives know that in a not-so-distant future their performances will start to decline.
Japanese economic fears are not just about oil.
So what is the cause of this impending economic "typhoon" for Japanese enterprises? The answer lies in one man: U.S. President Donald Trump and a series of decisions, and their reverberations. Trump's May 8 decision to pull out of the Iran nuclear deal sparked an increase in crude oil prices. After having plummeted to $35 per barrel two years ago, the oil price has risen gradually to about $70 per barrel. Two days after the US quit the Iran nuclear deal, Bank of America forecast that in 2019, oil price is expected to top $100 a barrel.
The economies of East Asian countries such as China, Japan and South Korea all are disproportionately dependent on Middle East oil supplies. That petrol prices will increase threefold in three years naturally has a big impact on these economies.
Japanese PM Abe and U.S. President Trump in Florida on April 18 — Photo: Allen Eyestone/ZUMA
But Japanese economic fears are not just about oil. Trump had also announced soon after taking office that the US was withdrawing from the Trans-Pacific Partnership Agreement, a trade agreement signed by 12 countries in the Asia-Pacific region, that had largely been driven by Japan and the United States. Add to that last June's announcement that the US was withdrawing from the Paris climate agreement. Maybe Trump has plans to move America from the Earth, and move to Mars!
Yet Trump's runaway train doesn't stop there. On May 14, America’s embassy in Israel was officially moved from Tel Aviv to Jerusalem. This of course poured fuel on the flame that is the Middle East — and as the entire 20th century has proven, when there is fire in the Middle East, the rest of the world will be swept in as well.
Japanese chief executives know that in a not-so-distant future their performances will start to decline.
Add to these more political actions the devaluation of the dollar and ongoing risks of a Sino-U.S. trade war, and we can better understand those curious expressions on the faces of top Japanese CEOs.
On May 9, Chinese Premier Li Keqiang and South Korean President Moon Jae-in were invited by Japan for a trilateral summit in Tokyo. In a joint declaration following the meeting, they said: “We recognize the importance of free and open trade and investment in achieving growth. We remain committed to liberalizing our economies, fighting all forms of protectionism, and improving the business environment." We might call this a "joint resistance declaration" aimed at President Trump’s protectionist ways.
As a Japanese saying goes: sophistry prevails over reason. Alas, the only thing that Asians can do is to prepare for the arrival of a storm, while praying that it doesn't come. Trump may not believe in the concept of "karma," but in Asia, with its Buddhist roots, we are convinced of cause and effect, where good intentions and deeds bring happiness and bad intentions and deeds are doomed to lead to suffering. In a globalized economy, however, the suffering tends to spread far and wide.
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