Japan Inc split on Trump tariffs as automakers brace for deeper hit
As Trump's levies on global shipments into the United States took effect on Thursday (August 6), Japan's top companies offered a mixed picture of how the tariffs, and a stronger yen are affecting America's fifth-largest trading partner.
Uncertainty surrounding the tariffs and their erratic implementation has rattled companies worldwide, as governments scramble to strike deals and shield major exporters from further disruption.
While some glimmers of optimism have emerged, Japanese firms remain uneasy about when Trump might lower tariffs on Japanese automobiles and whether new duties will target pharmaceuticals and semiconductors.
AUTOMAKERS UNDER PRESSURE
A Trump move targeting semiconductors with 100 per cent tariffs on some chip imports hit Japanese supply-chain firms on Thursday, even as shares of other companies with US expansion plans rose.
Tokyo on Thursday urged Washington to swiftly implement last month's bilateral agreement to reduce US tariffs on Japanese car imports to 15 per cent, down from the 27.5 per cent in place since Trump's April tariff hike.
Two weeks after Trump announced the deal, which he said includes US$550 billion in Japanese investments and loans, Tokyo is still working to clarify its terms, adding further uncertainty for corporate planners.
'It's honestly very difficult for us to predict what will happen regarding the market environment,' said Takanori Azuma, head of finance at Toyota, the world's largest automaker.
Toyota cut its operating profit forecast for the business year ending in March by 16 per cent to 3.2 trillion yen (US$21.7 billion), citing the stronger yen and tariff-related costs.
Despite the impact, Azuma said the company would continue making cars for US customers.
'Even at this point, incentives are very low and inventory is limited, so many customers are waiting. That's true not only in the US, but also in Japan,' he said.
Japanese carmakers have been among the hardest hit by the trade dispute, as they try to avoid raising prices and instead absorb the cost increases in their margins.
CHIPMAKERS AND EXEMPTIONS
In contrast, Sony raised its full-year profit forecast by 4 per cent to 1.33 trillion yen (US$9 billion), saying the estimated tariff impact had dropped to 70 billion yen, down from 100 billion yen previously.
Subaru said the tariff impact on its vehicles had also been reduced but warned it remained significant.
Honda on Wednesday (August 5) cut its projected tariff impact by 31 per cent to 450 billion yen, but said 'there are still many unknowns'.
As for chips, Trump offered a key exemption: the 100 per cent tariff would not apply to companies manufacturing in the US or committed to doing so.
While Japan is the largest foreign investor in the United States — with holdings worth US$819 billion at the end of 2024, according to US government data — its semiconductor industry has been reluctant to commit to large-scale US manufacturing.
Shares of Japanese chip equipment maker Tokyo Electron fell 2.7 per cent on Thursday, while testing equipment firm Advantest slipped nearly 1 per cent.
By contrast, chipmakers with large US expansion plans posted gains, with Taiwan's TSMC up 5 per cent and South Korea's Samsung rising 2.5 per cent.
TRADE BALANCE AND CONCERNS
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
CNA
9 minutes ago
- CNA
SoftBank shares surge to record after optimism for AI prospects boosted Q1 earnings
TOKYO :Shares in SoftBank Group jumped more than 13 per cent to a record high on Friday morning in a show of investor support for the Japanese technology investor's AI push after first quarter profit beat expectations. SoftBank's share price hit 14,205 yen at the close of morning trading. SoftBank has announced a series of mammoth investments this year, including committing $30 billion to ChatGPT maker OpenAI, as well as leading the financing for Stargate - a $500 billion data centre project in the United States. The firm beat analysts' expectations to report a net profit of 421.8 billion yen ($2.87 billion) for the April-June quarter, compared to a loss in the same period a year ago. Market enthusiasm for AI-related companies also pushed up valuations for its portfolio of listed and unlisted technology companies such that SoftBank's loan to value ratio improved to 17 per cent at the end of June compared to 18 per cent at the end of March. The results were "evidence of SoftBank's quality diversified portfolio, strong underlying fundamentals, thematic/secular tailwinds for its equity holdings, and the resilience of its balance sheet," Macquarie analyst Paul Golding wrote in a note. SoftBank was the biggest contributor to gains for Japan's Topix index, which rose some 1.5 per cent to trade above the 3,000 point mark for the first time in its history. The jump will provide some relief to SoftBank investors as its shares have traded at a more than 50 per cent discount to the value of its assets over the past five quarters. "Active investors scooped up SoftBank Group shares to beat the Topix's gain," said Seiichi Suzuki, chief equity market analyst at Tokai Tokyo Research Institute.
CNA
26 minutes ago
- CNA
BOJ debated chances of resuming rate hikes, July summary shows
TOKYO :Bank of Japan policymakers debated the likelihood of resuming interest rate increases with one signaling the chance of a hike this year, a summary of opinions at the July meeting showed, highlighting receding pessimism over the impact of U.S. tariffs. Some in the board also warned of mounting inflationary pressure in a hawkish tilt underscoring a growing view within the central bank that conditions for raising Japan's still-low borrowing costs could fall into place in coming months. At the July 30-31 meeting, the BOJ kept rates steady at 0.5 per cent but revised up its inflation forecasts and offered a less gloomy outlook on the economy than three months ago, keeping alive market expectations for a rate hike this year. While several board members warned of lingering uncertainty over the fallout from U.S. tariffs, one welcomed Japan's trade deal with the U.S. as "great progress" that heightened the likelihood of achieving the BOJ's forecast, the summary showed on Friday. The BOJ needed "at least two to three more months" to assess the impact of U.S. tariffs, another opinion showed, adding the impact on Japan's economy could remain "minimal" if the U.S. economy withstands the hit better than initially thought. "In that case, it may be possible for the Bank to exit from its current wait-and-see stance, perhaps as early as the end of this year," the member, whose identity was not disclosed, was quoted as saying. A few others in the nine-member board also signaled the possibility of resuming interest rate hikes. The BOJ must continue to raise rates when possible because its policy rate, at 0.5 per cent, is below levels considered neutral to the economy, one opinion showed, adding that the bank should not become overly cautious and "miss the opportunity" to hike. "It's important to raise rates in a timely manner" to avoid being forced to hike rapidly later and inflict huge damage to the economy, another opinion showed. Some warned of growing inflationary risks, with one opinion saying the BOJ is "now at a phase where it needs to place more emphasis on the upside risks to prices", the summary showed. "Inflation expectations seem to have reached 2 per cent and there's concern they will rise further," another opinion showed. The member added that compared with April, there was a bigger chance Japan will durably hit the BOJ's price target in the first half of the three-year projection through fiscal 2027. The caution over inflation risks was in line with a quarterly outlook report released after the July meeting, where the BOJ spelled out explicitly for the first time the risks of persistent food price rises fanning broad-based inflation. The hawkish views contrast with the focus on downside growth risks in the BOJ's previous report on May 1, released in the wake of Trump's April announcement of sweeping U.S. tariffs that stoked fears of global recession. The change in tone underscores the BOJ's growing confidence over Japan's economic recovery thanks to Tokyo's trade deal with Washington last month, which would lower levies for imports of goods, including its mainstay automobiles.
Business Times
39 minutes ago
- Business Times
Trump signs order targeting banks over political discrimination
[NEW YORK] US President Donald Trump signed an executive order on Thursday (Aug 7) aimed at eliminating practices by banks and their regulators that result in certain customers being denied access to financial services for ideological reasons. The order directs federal banking regulators to remove reputational risk standards from their guidance and training materials and identify financial institutions that engaged in unlawful 'debanking' in the past, the White House said in a fact sheet published after the signing. Federal authorities are also directed to impose fines or take other remedial measures they deem appropriate on institutions that are found to have had such policies. And regulators will also be required to review complaint data, and refer instances of unlawful debanking based on religion to the Justice Department. Financial institutions under the jurisdiction of the Small Business Administration will also be required to make reasonable efforts to reinstate clients who were unlawfully denied services. 'President Trump believes that no American should be denied access to financial services because of their political or religious beliefs, and that banking decisions must solely be made on the basis of individualised, objective, and risk-based analyses,' the White House said. Some of the nation's biggest banks have been accused by the Trump administration of shutting customer accounts for political or religious reasons. And many conservatives have complained that major Wall Street firms have debanked gunmakers, fossil-fuel companies, religious groups and cryptocurrency firms. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Trump signed the order alongside an action designed to increase access to alternative assets such as private equity, real estate and cryptocurrency in retirement accounts on Thursday afternoon at the White House. Details of the debanking executive order were reported earlier by Fox Business. Trump earlier this week said that banks had discriminated against him in the past. JPMorgan Chase had asked him to close accounts he held for decades within 20 days, and Bank of America declined his attempt to deposit more than US$1 billion, he said in a CNBC interview. Regulators in the Biden administration had been ordered to 'destroy Trump', the president said. Both JPMorgan and Bank of America have denied rejecting business on ideological grounds. The executive order requires the lenders to examine their processes for deciding whether to close accounts and asks regulators to remove references to so-called 'reputational risk' posed by customers, a practice banks have said that led to decisions not to deal with certain customers or industries. Bank of America, the second-largest US bank, had restricted lending to companies that make assault-style guns used for non-military purposes, following shootings at a high school in Florida in 2018. Citigroup also announced its own set of restrictions for clients selling guns that year. Bank of America went on to loosen its gun restrictions and made similar changes to its energy-lending policies, including dropping a blanket ban on financing for Arctic drilling. Then in June, Citigroup ended a seven-year policy that placed restrictions on firearms sales by its retail sector clients, citing recent legislative developments and concerns over access to banking services. Bills have been reintroduced in Congress this year that would prohibit banks from accessing certain lending programmes if they deny 'fair access' to their services. The 'Fair Access to Banking Act' has gained support from groups in the firearms industry. BLOOMBERG
