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Takahide Kiuchi, Executive Economist at Nomura, points out that at the Japan-US Summit held on 26 September, the two countries officially agreed to start trade talks, including negotiations on tariff rates.

Key Quotes

“Japanese media reports emphasized that Japan has avoided tariffs on automobiles and auto parts for the time being, but the longer-term outlook is probably not so rosy. The Trump administration remains very unhappy with the US trade deficit with Japan, and we should probably assume that it has not abandoned its hardline stance demanding that Japan adopt measures to rectify the trade imbalance between the two countries. Bilateral trade talks between the two countries have only just begun in earnest, and Japan is likely to find itself in a very tough position.”

“With the Trump administration assuming an increasingly strong protectionist stance on trade, the world’s trade framework is shifting from regionally integrated structures to bilateral negotiations, threatening to destroy the multilateral free trade system that has existed and thrived in the postwar era.”

“As the rules that have governed the postwar free trade system collapse, we see an increasing risk of the rise of economic blocs, possibly including a new economic zone made up of emerging countries centering on China. In this environment, Japan is expected to play a leading role in working for expansion of the Trans-Pacific Partnership (TPP) and using that trade structure to rebuild a multilateral free trade system. Such efforts by Japan could also serve as a barrier to the emergence of economic blocs.”