The Toyota plant in Derbyshire. Keidanren, a Japanese business lobby, is urging the UK to stay in the customs union
The Toyota plant in Derbyshire. Keidanren, a Japanese business lobby, is urging the UK to stay in the customs union © Bloomberg

Japanese companies are increasingly frustrated by the double talk from the British government over Brexit and are hamstrung on how to respond, according to the head of Japan’s most powerful business lobby.

“We just can’t do anything. Everyone is seriously concerned,” said Hiroaki Nakanishi, chairman of Keidanren, in an interview with the Financial Times. “Various scenarios get discussed, from no Brexit to plunging into Brexit without any kind of deal at all. We’re now in a situation where we have to consider what to do in all of them,” he said. 

His comments highlight the sense of despair among Britain’s biggest foreign employers after waiting more than two years for clarity about what Brexit will mean.

Keidanren represents more than a thousand of Japan’s biggest companies including large investors in the UK such as Toyota, Honda and Nissan. Mr Nakanishi, who took over as chairman in May, also chairs Hitachi and is one of the country’s best-known industrialists. 

Mr Nakanishi said a no-deal Brexit would be disastrous and urged Britain to stay in the customs union.

Mr Nakanishi added that the British government has not acted on requests in a 15-page memo from the Japanese government in September 2016 and British ministers do not speak to him with one voice. “When you talk to the UK government, they say something a bit different depending on who is speaking.” 

He called for clarity by March next year. “Please keep the current economic environment as much as possible, including the customs union,” Mr Nakanishi said. “If you don’t then it will clearly hinder economic activity in the UK,” he warned. 

Mr Nakanishi said “huge geopolitical risks” including tensions over trade were a concern in what is otherwise a strong environment for Japanese companies. 

The imposition of more US tariffs could seriously harm Japan, he said, especially if the Trump administration goes ahead with a threatened levy on cars. Japan is already working with its US customers to highlight the disruption caused by tariffs on items such as speciality steels, widely used in the oil and gas industry. 

Beyond that, Keidanren and the Japanese government are trying to address US concerns about a trade imbalance, said Mr Nakanishi, but there are no easy answers to a bilateral deficit. “The demands from the American side change so it’s extremely difficult.” 

Fresh US sanctions on Iran have also upset corporate Japan, which was just ramping up its dealings with an important oil supplier and an attractive growth market. Mr Nakanishi said Japan should seek exemptions from the sanctions. “I don’t think we’ll get them but we should certainly ask. Completely isolating a country will have negative effects in all kinds of ways. For Iran, they can only turn to China,” he said. 

In the past, trade tensions with the US would have a disastrous effect on corporate investment in Japan, but Mr Nakanishi, who led a widely admired turnround at Hitachi, said a lot has changed. 

“For example, 10 or 20 years ago we might be spending $5bn at once on a semiconductor plant,” he said. “That kind of capital investment doesn’t happen so much any more. Now we invest in robotics or on revolutionising our logistics.” 

“If we go back to the impact of tariffs, then compared with the old style of capital investment it is far less affected,” he said. 

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