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Economy

Tokyo eyes fresh deals with UK to blunt Brexit blowback

Agreements on customs, evidence-sharing and nuclear cooperation put in fast lane

A no-deal Brexit would kick the U.K. out of pacts between Japan and the EU, raising tariffs and creating headaches.   © Reuters

TOKYO -- Japan's government is preparing agreements to minimize turbulence from the U.K.'s March 29 split from the European Union, keeping procedures like customs smooth even in the event of a chaotic "no-deal" Brexit, Nikkei has learned.

Tokyo is hurrying to arrange or revise three pacts with London, including an agreement to mutually recognize each other's trade standards. Japan currently has a mutual recognition agreement with the EU, letting Japanese businesses handle some needed customs steps on their end before exporting goods such as electronics.

Removing the U.K. from that pact in the event of a no-deal separation would add red tape and costs for exporters. The Japanese government hopes to maintain the arrangement with Britain on a provisional basis after Brexit.

Tokyo will also seek to re-create with London its agreement with Brussels to provide mutual legal assistance, which makes it easier to share evidence in investigations of international crimes like terror attacks.

The U.K.'s deal with Japan to cooperate on nuclear energy, under which Britain stores some Japanese plutonium, will also need to be revised. The agreement is currently co-signed by London, Brussels and the International Atomic Energy Agency, but the EU's safeguards will become unnecessary and thus will be written out.

The two sides will also discuss new post-Brexit trade frameworks. A no-deal departure would kick London out of the economic partnership agreement between Japan and the EU which entered into force this month. Ironing out a new deal with the U.K. would likely take at least a year, leaving Japanese exports exposed to heavy tariffs after Brexit.

Automobiles would be hit especially hard. Under the Japan-EU agreement, tariffs on Japanese passenger cars crossing into Europe, which are currently just under 9%, will be gradually lowered to zero. A no-deal Brexit would snap U.K. duties on Japanese autos back to their original 10%, according to Japanese government officials. Auto parts would reportedly face tariffs of up to 4.5%.

Japan exported about 250 billion yen ($2.26 billion) worth of passenger cars to the U.K. in 2018.

The Japanese government is also asking that businesses stockpile six months' worth of pharmaceuticals, quadruple the current level, due to concerns over the potential disruption to customs procedures.

The U.K. and EU worked out an agreement last year that includes a post-Brexit transition period set to last through the end of 2020. If this plan is approved, Britain will still be party to pacts between Japan and the EU during that transition, and London and Tokyo will have to wait to conclude bilateral agreements.

As of 2017, there were 986 Japanese companies doing business in the U.K.

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