January 17, 2017 3:00 pm JST

Trump tax cuts to keep US strong for two years: Suntory chief

Beverage group president sees potential U-turn on TPP

TOKYO -- The world stands on the cusp of an era which will be defined, to no small extent, by the presidency of Donald Trump. But the real estate tycoon's policy agenda remains a mystery to many, and policymakers the world over are working to figure out what it will look like.

In a recent interview with The Nikkei, Suntory Holdings President Takeshi Niinami, a Harvard-educated member of the Japanese government's Council on Fiscal Economic and Fiscal Policy, discussed his views on Trump's policies and their implications for Japan.

Q: What do you think the U.S. will look like under Donald Trump?

A: It will be a country riddled with contradictions. Trump will be a Republican president supported by workers and middle-class voters who are unhappy with the status quo. Whether he should pursue grand policies or a small government strategy will be a tricky question. He will have to tackle many conflicting issues.

I don't think Trump will hesitate to go back on his campaign promises when he thinks it is necessary. Like the businessman that he is, he will focus on how to deal with problems concerning the present and future of his country instead of being shackled by the past. He will adopt realistic policies without giving the impression that he has radically changed his platform.

Q: What are your main worries surrounding the Trump presidency?

A: I'm worried about his stance toward trade policy, which is highly reminiscent of the 1980s. He will probably prioritize bilateral trade deals, but separate negotiations with many countries will be a long slog. With China emerging as a strong rival, it is now more difficult for the U.S. to strong-arm other countries. Looking at things from an optimistic point of view, the U.S. may return to a [multilateral] deal like the Trans-Pacific Partnership in two years or so.

Q: Trump is using Twitter "threats" to put pressure on companies. What are the implications?

A: American companies have been the main beneficiaries of globalization and free trade, which have driven their growth. A protectionist policy simply doesn't work in a world of highly intertwined economies. If the U.S. imposes punitive tariffs on imports, the country will lose its attraction as a country to invest in. At the moment, though, we need to respond very carefully [to Trump's attacks]. Toyota Motor responded wisely by explaining its investment plan.

Q: What is your outlook for the U.S. economy?

A: The U.S. economy will be in fine shape for at least two years. President Barack Obama should be given credit for laying the foundations. The Trump administration will probably lower the corporate tax rate to around 20-25% from the current 35% and also implement tax cuts for individual taxpayers in response to calls within the Republican Party. It will also make investments in infrastructure in the Midwest.

Competition in the U.S. will get fiercer as consumer spending in the country remains on a firm footing. Our U.S. subsidiary, Beam Suntory, will focus on high-quality bourbon whiskey and run its plant in the U.S. at full capacity.

Q: Do you think the strong dollar is set to continue?

A: I believe the U.S. Federal Reserve will raise interest rates three [more] times before Chair Janet Yellen's term expires. The yen could weaken against the dollar to the 127 level. But the currency market is nervous about moves made by the unpredictable new president, and there will be wild fluctuations in exchange rates. China may move to float the yuan if it becomes impossible for the country to withstand pressure on the currency from a strong dollar.

Q: The weaker yen has apparently given Japanese companies some breathing room. How do you see the situation progressing?

A: Japanese companies need to reform themselves so that they can make profits even if the dollar falls to 100 yen. Unless private-sector investment in Japan increases while the U.S. economy is in good health, the future of the Japanese economy will be bleak. It is impossible to predict whether the Trump administration will retain its political momentum after the midterm elections in 2018.

Prices will rise at annual rates of around 1% [in Japan]. The key question is whether wages will rise faster. A system to ensure constant pay growth should be established through efforts to boost productivity, including reforms of the way people work.

Q: Are you saying companies should play a leading role in reforms?

A: Companies should lead the efforts to tackle such serious problems as income gaps and social discontinuity.

Interviewed by Nikkei senior staff writer Mikio Sugeno

Toyota Motor Corp.

Japan

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