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Trade War

Trade war saps confidence of Japan's business leaders

Fewer expect continued global growth as tariffs and Brexit loom large

Japanese executives are increasingly concerned about growing trade tensions and the slowdown in Chinese economic growth.   © Reuters

TOKYO -- While the majority of Japan's corporate leaders remain positive on the outlook for the global economy, the ongoing trade war between the U.S. and China is starting to impact business sentiment and capital investment, a Nikkei survey showed.

Of the leaders of 144 companies that responded to the latest quarterly poll, 71.5% said the global economy will expand over the next six months -- 7.8 points less than in Nikkei's last survey in June. Meanwhile, those expecting a gentle decline increased 1.4 points to 4.2%.

Worsening global trade frictions were the most commonly cited reason for concern, with 63.2% of respondents saying they are a risk to the global economy. This was followed by the spread of protectionism at 47.2%, China's economic slowdown at 45.1%, and the political turmoil in the U.S. at 33.3%.

Many Chinese businesses are shying away from new investment after the U.S. enacted tariffs on another $200 billion worth of products on Sept. 24. This has been a blow to Japan's machinery makers, whose orders from China shrank on the year for a sixth straight month in August.

With no end in sight to the trade war, 5.6% of respondents said they would lower capital investment slightly for the year ending March 2019 from original plans.

"The trade war could be a trigger for a decline in the world economy, which has been growing until now," said Takeshi Niinami, president and CEO of beverage group Suntory Holdings.

The U.K.'s exit from the European Union, which is now just six months away, is raising concerns as well. Seven percent of business leaders said they either have or plan to move offices and production facilities out of the U.K., and 25.7% expect the exit -- which could cause turmoil both in the region's economy and in the currency market -- to have a negative impact on their business.

Toyota Motor said it will most likely be forced to temporarily suspend production at a British plant due to disruptions in its supply chain.

In terms of what they hoped for from Japanese Prime Minister Shinzo Abe, who won a third term leading the ruling party last month, 45.8% said they wanted bold regulatory reform and 30.6% said lower corporate taxes.

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