Japan: Growing concern over trade war – Nomura

The trade policy hammered out recently by the Trump administration in the US has sparked concern over the emergence of protectionism, according to analysts at Nomura.

Key Quotes

“On 22 March, the US announced the imposition of 25% duties on imports from China with a scale of around $50bn based on Section 301 of the Trade Act, and on 23 March imposed high tariffs on steel and aluminum imports from many countries and territories including Japan under Section 232 of the Trade Expansion Act. While it may be too soon for concerns that the race to increase tariffs might intensify to an extent where it causes global trade volume to fall substantially.”

“Review of spring 2018 wage negotiations

• Responses to spring wage negotiations for 2018 peaked on 14 March, after which the Japanese Trade Union Confederation (Rengo) released the results of its first survey on 16 March and its second survey on 23 March. We had expected the 2018 wage negotiations to be a forum for lively discussion, especially given the government's banner-waving in favor of specific wage hikes, and Rengo’s first survey indeed revealed a base pay increase of 0.77%, much higher than the 0.43% increase in the first 2017 survey. However, the base pay increase slowed to 0.64% in the most recent second survey.
• Given the present labor shortage, the base pay increase potentially could be revised up again in the third or subsequent survey, but we would draw attention to a possible flattening in the wage curve, which increases in tandem with workers' age, and in our view there is a low likelihood that wage growth will accelerate rapidly.”