POLL: Japan firms say China protests affect business plans

September 21, 2012

REUTERS

About 41 percent of Japanese firms see friction with China affecting their business plans, with some considering pulling out of the country and shifting operations elsewhere, a Reuters poll showed, amid growing tensions sparked by a territorial dispute.

However, only a fraction of firms said improving relations with Asia should be at the top of the agenda for the next government, to be formed after general elections that must be held by around August 2013.

The poll comes as relations between Asia's two biggest economies have hit their lowest point in decades over a dispute centered on an uninhabited group of islands in the East China Sea--known as the Senkaku in Japan and Diaoyu in China.

Street protests in China have forced some Japanese firms to suspend operations in that country, and the share prices of Japanese firms with exposure to China have tumbled.

But the poll of 400 large and medium-sized firms, of which roughly 260 responded between Aug. 31 and Sept. 14, was taken before the worst of the protests, which damaged factories, restaurants and retail stores.

Firms in sectors such as wholesale, transport equipment and electric machinery were among those expecting the most fallout from worsening relations with China and other parts of Asia.

Some of the firms which see friction with China affecting business plans have suffered not only from rowdy protests involving damage and consumer strikes, but other problems as well.

"We were stranded at customs there even as we followed proper procedures for exporting parts," said one machinery firm.

A transport machinery company complained that it was excluded from bidding in China.

"We need to consider closing our base in China and withdrawing our personnel," said one metal products company.

Others voiced caution about investing in China, while considering putting off plans to make inroads into Chinese markets or seeking alternate sites.

China, the world's second-largest economy, and Japan, the third-largest, have total two-way trade of around $345 billion, but some experts believe anti-Japan sentiment could prompt firms to rethink investments in China in the longer term.

In the Reuters poll, 56 percent of firms urged the next Japanese government to put the utmost priority on steps to prop up the economy and stabilize currency rates, while only 2 percent cited smoother diplomatic relations with Asia.

With the dollar hovering around 78 yen, not far from a record low of 75.31 yen hit last October when Japanese authorities intervened heavily to stem their currency's gains, about one-third or respondents sought yen-selling intervention to help safeguard the export-reliant economy.

On the government's contentious plan to double the sales tax to 10 percent by 2015, 45 percent said it should be implemented as planned while 40 percent said the state of the economy at the time should be considered before making a final decision.

Only 10 percent called for putting off the sales tax rise, in stark contrast with the many lawmakers who are wary of a voter backlash over the tax increase.

REUTERS
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The Jusco Huangdao store in Qingdao, Shandong province, after looting by anti-Japanese demonstrators on Sept. 15 (Koichiro Ishida)

The Jusco Huangdao store in Qingdao, Shandong province, after looting by anti-Japanese demonstrators on Sept. 15 (Koichiro Ishida)

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  • The Jusco Huangdao store in Qingdao, Shandong province, after looting by anti-Japanese demonstrators on Sept. 15 (Koichiro Ishida)

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