Abe-Trump meeting positive for Japan

The meeting between the Japanese and US leaders was more amicable than many expected, leaving the serious battles to be fought another day.



Andrew Rose
Fund Manager, Japanese Equities

President Trump and Japan’s Prime Minister Shinzo Abe have concluded a weekend of discussions and golf in Washington and Florida.

Despite some odd body language and a rather awkward handshake, the overall tone of the meetings appears to have been warmer than expected. Mr Abe appears to have pledged little more than some job creation in the US, while Mr Trump appears to have downplayed trade issues, at least for the time being.

Beyond the handshake

This relatively passive approach from both sides was surprising given previous rhetoric around the Trans-Pacific Partnership (TPP) trade agreement.

Indeed the incoming US president had made withdrawal from the TPP virtually his first act in office, suggesting that any perceived asymmetry in trade negotiations would be pursued aggressively.

The perception that Mr Trump’s policies would have a negative impact on the Japanese economy had caused considerable unease among the population. Mr Abe’s apparent ability to walk away from this visit unscathed is likely to further boost his domestic standing.

A further potential landmine had been a rather random threat from Mr Trump to label Japan as a currency manipulator. Most commentators had already viewed this as a misplaced or at least outdated criticism of Japan, but the simple fact that Finance Minister Aso attended meetings in the US was seen to raise the stakes on this issue. Again, however, Japan was able to avoid direct criticism, at least in the official communications.

The enemy of my enemy

The weekend of dinner and golf, with little evidence of hard negotiation, was in danger of tailing off into anti-climax. That was until North Korea somewhat conveniently decided the time was right to test-fire a long-range missile into the Sea of Japan.

Unwittingly or not, this provided Messrs Trump and Abe with a perfect opportunity to present a united front against a common enemy at a hastily arranged press-conference. Indeed Mr Trump was almost over-enthusiastic in declaring that Japan and the US stand together against North Korea, while apparently neglecting to acknowledge any role for South Korea in the process.

Overall, this was a good weekend for Mr Abe, though most of the serious battles remain to be fought another day.

The views and opinions contained herein are those of Schroders’ investment teams and/or Economics Group, and do not necessarily represent Schroder Investment Management North America Inc.’s house views. These views are subject to change. This information is intended to be for information purposes only and it is not intended as promotional material in any respect.


Andrew Rose
Fund Manager, Japanese Equities



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