Less Japanese Firms Optimistic of Growth

About 60% of major Japanese companies expect the economy to grow in 2017 on recovering consumer spending and hopes that president-elect Donald Trump’s policies will boost the US economy.

That percentage is down from the 90% that forecast growth in a similar survey a year ago, as many Japanese companies are concerned by Trump’s unpredictability, political inexperience and oft-stated intention to radically overhaul US trade policy, Kyodo news agency said Monday.

Of the 108 companies surveyed between late November and early December, including Toyota Motor Corp. and Sony Corp., 63 said they expect the economy to expand this year, of which 61 expect moderate growth. Forty-one said they expect no growth, while two projected a moderate contraction.

Asked in a multiple-choice question why they think the economy will expand, 32 companies cited rebounding consumer spending, 23 pointed to stepped-up capital spending and 19 specified an improving US economy.

The survey shows many Japanese companies envision growth driven by increasing external demand given that Trump has pledged to slash US taxes and boost government spending on infrastructure and public works.

However, 59 companies—or just over half—said that they have no idea how US-Japan relations may change under the incoming Trump administration, evidence of the major uncertainty engendered by the president-elect’s “America First” stance. Trump has also vowed to withdraw the United States from the Trans-Pacific Partnership on his first day in office.

Only 28 companies said they do not expect big changes in ties, while four said relations between the two countries will improve.

In a multiple-choice question on what could happen under the next US administration, 45 companies foresee more protectionist policies coming, 37 expect US economic growth to accelerate, and 23 anticipate a deterioration of US state finances, while only 12 companies cited a weakening of the yen.

Trump’s election victory has already caused the dollar exchange rate to surge from around ¥104 the day before voting to around ¥116 at year-end.

The survey found just 21 companies are willing to increase capital spending in 2017, with 39 saying that it will be “flat,” indicating many companies are cautious about new investment.

In a multiple-choice question on what economic steps they want Prime Minister Shinzo Abe’s administration to promote, 46 companies said they hope the government will carry out deregulation, 40 called for fiscal reform, 33 want the government to cut corporate taxation and 33 hope for social security system reform.