World Economy

Japan’s $59b Rides on Brexit Vote

Japan’s $59b Rides on Brexit VoteJapan’s $59b Rides on Brexit Vote

Japan Inc. has $59 billion at stake on the June 23 referendum in the UK, when Britons vote to either leave or stay in the European Union.

That’s the amount Japanese companies have invested in the UK, which benefits more from the Asian nation than any other country outside Europe apart from the US, according to figures compiled by the Japan External Trade Organization, Bloomberg reported.

More than 1,300 Japanese companies—including Toyota Motor Corp., Hitachi Ltd. and Nissan Motor Co.—employ over 140,000 people in the UK, Prime Minister David Cameron said last month.

That explains why officials from Prime Minister Shinzo Abe to executives of top Japanese companies have been vocal in their support of Britain staying within the 28-nation trading bloc.

A Rethink Possible

“It would be harder to invest in the country should it vote to leave the EU,” said Kazuko Yamazaki, a senior economist at Daiwa Institute of Research Ltd. “Some companies may consider opening other bases around Europe.”

Should the UK leave the EU, the biggest destination for international direct investment in the bloc risks more than 107,000 manufacturing jobs likely to be created by 2030 because of the deepening of the single market, the Center for Economics and Business Research estimates.

Hitachi Ltd., which opened a train manufacturing facility in the UK last year, supports the UK staying in the EU, and an exit vote may “force us and similar companies to rethink” their UK operations, Chairman Hiroaki Nakanishi wrote in an op-ed in the UK’s Mirror newspaper this week.

Swiss Complain

Once again, someone else’s crisis is threatening to make life more difficult for the Swiss.

Ever since it abandoned an exchange-rate cap in January 2015, the Swiss National Bank has battled against the franc’s appeal as a haven, guiding the currency lower with intervention and interest-rate cuts in an effort to keep the economy competitive. The strategy is finally paying off, with the franc posting its weakest month versus the euro since the currency limit was scrapped.

Now all that’s at risk. “Could we see a Brexit and the collapse of the single currency? Absolutely,” said Peter Rosenstreich, head of market strategy at Swissquote Bank SA in Gland, Switzerland, who a year ago predicted that the franc would gradually lose haven status.

If Britain does vote to leave, and the crash in the pound and euro that many strategists anticipate happens, then Switzerland—which is outside the EU but borders the trading bloc—is the natural place for money to escape to.

Selling the franc to curb its gains means the SNB has amassed record foreign-exchange reserves—much of them in euros. That makes Brexit a double danger for Switzerland: the value of its foreign holdings may fall, and a stronger currency may make exports less competitive and keep prices depressed.