- U.S. Reciprocal Tariffs Ruled Unconstitutional
- China's Export Ban on Dual-Use Items to Certain Japanese Companies
- EU Industrial Accelerator Act
- Japan's Approach to Economic Diplomacy
- National Council on Tax and Social Security
U.S. Reciprocal Tariffs Ruled Unconstitutional
(In response to a question about the U.S. Supreme Court's ruling that reciprocal tariffs are unconstitutional, and the impact on the Japanese economy of the 10 percent new tariff measures imposed as an alternative) We believe the court ruling demonstrates that the checks and balances essential to a democratic system are functioning. However, while only the legal basis was struck down, tariffs as a policy tool were not rejected. We need to continue closely monitoring developments in the Trump administration ahead of the midterm elections. We understand that new tariff measures of 10 percent have been imposed and that an increase to 15 percent is also under consideration, and we will continue to watch developments closely.
There will naturally be an impact on the Japanese economy, but it is not possible to state definitively at this point how large that impact will be. We understand that the EU is seeking clarification regarding the new tariff measures, but the situation 150 days from now, when those measures expire, remains unclear, and we are concerned that predictability for Japanese companies will decline for the time being.
(In response to a question about the positive and negative impacts of the U.S. Supreme Court ruling on the Japanese economy and businesses, and what is expected of the Japanese government to improve the situation) Going forward, we believe companies considering investment face an extremely opaque and unpredictable situation. Not only is the outlook uncertain over the 150-day period during which the new tariff measures remain in effect, but we also anticipate that some companies will file lawsuits seeking refunds of the previous reciprocal tariffs in order to fulfill their accountability obligations to shareholders and investors. From this perspective, Japanese companies face a highly unstable and uncertain environment.
We hope the Japanese government will maintain appropriate communication with the U.S. government. At the same time, in its communications with other major governments, we would like it to share its approach toward the US tariffs policy going forward. At this point, we believe the markets are reacting calmly, but we ourselves also need to monitor future developments closely.
(In response to a follow-up question about whether the reference to investment decisions becoming more difficult pertains to the Japan-U.S. Strategic Investment Initiative or to investment in general) My comments on investment decisions were made in general terms. That is, when Japanese companies undertake investment activities in the United States and elsewhere around the world, the decline in predictability and the uncertainty surrounding the outlook are a cause for concern for the time being.
The Japan-U.S. Strategic Investment Initiative was established through Japan-U.S. tariff negotiations, and I understand that the two countries have reached agreement on advancing three specific projects. In the context of mutual interests between Japan and the United States, Japan's economic security, and strengthening the Japan-U.S. relationship, the Initiative should be maintained and continued.
(In response to a further question about whether government involvement in individual companies' refund lawsuits is necessary) Regarding refund lawsuits, I believe a certain degree of firm action is called for. While the government cannot become involved in litigation brought by individual companies, it would be valuable for the government to provide information beneficial to Japanese companies and the Japanese economy through appropriate communication between the two governments.
(In response to a question about how companies filing lawsuits for refunds of reciprocal tariffs should explain this to shareholders and investors) Each company and industry should make a comprehensive judgment based on its specific characteristics, its history of investment, and its ties to local communities where it operates in the United States. The way shareholders and investors seek explanations from companies naturally varies depending on their profiles. Given this, how companies secure the understanding of shareholders and investors while taking into account their various demands is fundamentally a matter for each company to address through its own efforts. We hope the Japanese government will focus on creating an environment that enables Japanese companies and the business community to respond smoothly through appropriate communication with the U.S. government.
(In response to a question about what specific aspects of the Trump administration's direction ahead of the midterm elections are being watched closely) We need to pay close attention to how the domestic support base for President Trump evolves going forward. Even if the America First approach itself continues, we need to watch whether the administration pursues a harder line, and to what degree. Depending on shifts in the domestic support base, there could also be changes in international influence, including in the area of security.
China's Export Ban on Dual-Use Items to Certain Japanese Companies
(In response to a question about China's Commerce Ministry announcing an export ban on dual-use items to 20 Japanese companies and entities, and whether affected companies shared information in advance) Following the strengthened export control measures imposed on January 6, these latest measures go further by targeting specific Japanese companies, which is deeply regrettable, and we call for their withdrawal. There was no advance information sharing within Keidanren, and I myself first learned of this through media reports. That is how sudden it was.
(In response to a question, given that China has cited curbing Japan's military buildup as a reason for the measures, about whether the priority should be a return to pacifism or industrial development) This should not be framed as a binary choice between pacifism and industrial development. Viewed realistically, the importance of Japan's national security has only grown. In this context, Keidanren believes that, as we strive to make Japan a science and technology powerhouse, we must also keep dual-use applications in view. I understand the Takaichi administration shares this direction, and Japan is by no means unique in strengthening its defense posture in today's world. China's latest measures need to be understood within the context of today's hard geopolitical realities. Of course, these measures are regrettable, and we must call for their withdrawal.
(In response to a further question about reputational risk for the companies and entities placed on the export control list) I will refrain from commenting in detail on specific companies. Generally speaking, I believe the public widely recognizes the growing importance of defense and security amid a challenging international environment. Furthermore, the importance of dual-use applications in science and technology is also increasingly being recognized domestically. For these reasons, even if a company has been placed on such a list, the climate is no longer one in which that would generally create reputational risk for the company.
(In response to a question about what is expected of the Japanese government in light of these measures) It is important to make appropriate representations to the Chinese government regarding these measures. At the same time, it is important for both the public and private sectors to share detailed information on the specific impacts these measures will have on the companies and entities on the list, and on what situations may arise. Given the strong alliance between Japan and the United States, efforts to break through the current impasse may also come into play. Until now, the situation has been extremely difficult politically, but it has now entered a phase where economic dimensions are also affected, with potential impacts on corporate activities going forward. From this perspective, the importance of pursuing communication and dialogue at all levels and across all fields is greater than ever. Prime Minister Takaichi has repeatedly stated that she is always open to dialogue. The business community must also seek openings for dialogue.
EU Industrial Accelerator Act
(In response to a question about the impact on Japanese companies of the Industrial Accelerator Act that the European Commission plans to propose) The most important thing is to ensure that Japanese companies are not excluded. As the world faces division, confrontation, and climate change, it is understandable to some degree that non-price factors would be considered as requirements for public procurement and subsidies from economic security and environmental perspectives. However, if "made in Europe" is added as one such non-price criterion, it is important that this does not run counter to the need for Japan and the EU to cooperate as partners amid a challenging international environment. Keidanren has repeatedly conveyed this point during visits by European Commission officials to Japan and through our mission to Europe in December last year, and we are also coordinating our efforts with the United Kingdom, which shares the same position. I believe these efforts have yielded a certain level of understanding. Japan and the EU are called upon to work hand in hand to maintain a free and fair trade and investment environment.
(In response to a question about the growing trend in the global economy, led by the EU, of prioritizing regional industrial protection) As economic security is strengthened and environmental issues grow in importance, the trend of countries pursuing their own industrial policies should not be categorically rejected. At the same time, Japan has developed as a nation built on trade and investment, and I believe Japan should take the lead in the international community in advocating for consistency with international rules, including those of the WTO, so as not to undermine the free and open international economic order.
Japan's Approach to Economic Diplomacy
(In response to a question about the need to build a framework that avoids excessive dependence on the United States and China) The point about not becoming excessively dependent on the United States and China seems correct. The fundamental approach is to firmly maintain the overarching principle and direction of upholding and strengthening a free and open international economic order. Within that framework, taking global realities into account, it is important to build resilient trade structures that do not depend on any single country. From this perspective, deepening the CPTPP and expanding its membership, engaging the Global South, and strengthening cooperation with the EU and others are among the areas where we must further promote private-sector economic diplomacy going forward.
National Council on Tax and Social Security
(In response to a question about member companies' views on a consumption tax cut and how Keidanren intends to participate in discussions at the National Council) It is true that many in Keidanren are concerned about market confidence in fiscal management. A consumption tax cut, even as a two-year temporary measure, would require an enormous amount of funding. For this reason, from the perspectives of the sustainability of the social security system and maintaining market confidence in fiscal management, the question of how to secure funding should be thoroughly examined and presented at the National Council.
Keidanren has called for the establishment of the National Council from the standpoint that it is essential to make the structure of benefits and burdens transparent, grasp the current situation, and discuss what form of contributions based on ability to pay would be desirable. We expect these points to be discussed at the Council going forward, and Keidanren intends to be actively involved. Of course, we understand that the design of a consumption tax cut and refundable tax credits will be the immediate topics of discussion. For example, issues such as system adaptation, operational challenges primarily in the food service and broader service industries, and the impact on revenues in related industries need to be examined, which requires private-sector perspectives and expertise, making private-sector participation in the National Council highly meaningful.