Business | FOCUS

For Japan, the fear is real that May's Brexit deal will get shot down

by Isabel Reynolds

Bloomberg

Japan has a lot riding on Brexit. That’s something Shinzo Abe is sure to drill home to Theresa May when he flies over to see her in person mere days before Parliament is poised to vote on her divorce plan.

Few countries are as worried about the prospect of a disorderly exit, given the degree of foreign investment in the U.K., from carmakers Nissan Motor Co. to tech conglomerate SoftBank Group Corp. and fashion brand Uniqlo.

For them, the U.K. is their foothold in Europe and her deal may be the only thing guarding them from the chaos of a no-deal outcome. That is why Abe will probably speak out in favor of May’s proposal, according to a Foreign Ministry official.

A public show of support from Abe would show just how concerned Japan is that the U.K. is flirting with disaster and that its top companies could get caught in the crossfire. According to the official, who asked not to be identified, Abe will focus on the negative effects of Brexit and remind her that disruption to Japanese businesses must be kept to a minimum.

“World attention is focused on the U.K.’s exit from the EU,” Abe told reporters before leaving Tokyo for a visit to the U.K. and the Netherlands, in comments broadcast by television network TBS. “Precisely because of this problem, it is very meaningful for me to visit the U.K. and exchange opinions. I want to properly convey Japan’s thinking.”

Abe and May will have lunch together after he arrives on Thursday, followed by a news conference and a business reception. This will be his second visit to the U.K. since May took office and his seventh meeting with the prime minister. On a visit to London weeks ahead of the 2016 referendum, Abe offered vocal support for then-Prime Minister David Cameron’s campaign to remain in the EU.

Months later, Japan issued an open letter to the U.K. urging predictability in the process of Brexit negotiations on behalf of the roughly 1,000 Japanese companies operating there, including car manufacturers that account for half of the U.K.’s production.

Less than three months before the U.K. leaves the European Union on March 31, May’s deal appears to have little chance of passing given the tough parliamentary arithmetic. For many companies, January was the cut-off after which contingency plans went into effect.

Instead the U.K. is talking up no-deal preparations and even those are not going as planned. For example, a practice run for a potential traffic jam caused by delays at the port of Dover turned into a farcical flop when not enough trucks showed to complete the drill. None of this will be reassuring to investors, especially Japanese ones who are among the most exposed.

When Boris Johnson visited Japan as foreign secretary in 2017, he shook hands with a robot and promised a “fantastic, all-singing and all-dancing, U.K.-Japan free trade agreement.” Last year he resigned and is now one of the fiercest critics of her plan, calling it a “suicide vest” and even embracing “no deal” as something voters want.

This turn of events will have done little to put Japanese executives at ease.

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