HANGZHOU — Tokyo issued its boldest warning yet over the potential fallout from Brexit, saying Japanese firms may shift key operations from Britain to Europe if they lose free access to the single market.
With a G20 summit under way in China, a Japanese government taskforce told Britain and the EU to minimise the “harmful effects” of Brexit on firms that treat the UK as a gateway to Europe.
Some of Japan’s best-known companies, including Toyota, Hitachi and investment bank Nomura, are re-assessing their UK investments after Britain voted in June to quit the 28-member EU, according to a report issued by Tokyo.
“Japanese businesses with their European headquarters in the UK may decide to transfer their head-office function to Continental Europe if EU laws cease to be applicable in the UK after its withdrawal,” said the 15-page document, published on Friday.
The topic is almost certain to come up if Japanese Prime Minister Shinzo Abe and British leader Theresa May hold a meeting on the sidelines of the G20 talks in Hangzhou.
US President Barack Obama told a joint briefing on Sunday with May that they had discussed trade and both countries aim to “ensure that we don’t see adverse effects” in their commercial ties.
Japan warned that some of its firms were lured to Britain by its sales pitch as a launching pad for tapping the much-larger European market, adding that London has a duty to hammer out a Post-Brexit deal that protects Japanese companies.
“We strongly request the UK will consider this fact seriously and respond in a responsible manner to minimise any harmful effects on these businesses,” the report said.
More than 1,000 Japanese companies do business in Britain, employing some 140,000 local people, and Japan’s direct investment in the country has topped 10 trillion yen (RM390 billion) to date.
The report also urged Britain and the EU to make the Brexit negotiation process transparent to avoid “unpleasant surprises”.
“Uncertainty is a major concern for an economy,” it said.
“What Japanese businesses in Europe most wish to avoid is the situation in which they are unable to discern clearly the way the Brexit negotiations are going, only grasping the whole picture at the last minute.”
The G20 leading economies will set up a global forum to combat world industrial oversupply, a senior European Union diplomat said yesterday.
The final communique will say that “measures like subsidies are a root cause of market distortions” and a forum will be set up “to monitor the process” of cutting overcapacity, the official said.
The global steel industry is assailed by huge oversupply with Chinese demand plummeting as its economic growth has slowed.
The G20 host produces half of the world’s steel and it stands accused of dumping on global markets by the US and European Union.
He said the G20 group will also agree at their summit that refugees are a global issue and the burden must be shared.
“The communique reaffirms it is a global issue, and requires burden-sharing among countries,” the diplomat told reporters, shortly before the declaration was due to be released at the end of the summit. — AFP