Brexit opposed by Japan Inc. as $59 billion rides on ballot

Bloomberg

Japan Inc. has $59 billion at stake on the June 23 referendum in the U.K., when Britons vote to either leave or stay in the European Union.
That’s the amount Japanese companies have invested in the U.K., which benefits more from the Asian nation than any other country outside Europe apart from the U.S., according to figures compiled by the Japan External Trade Organization. More than 1,300 Japanese companies — including Toyota Motor Corp., Hitachi Ltd. and Nissan Motor Co. — employ over 140,000 people in the U.K., Prime Minister David Cameron said last month.
That explains why officials from Prime Minister Shinzo Abe to executives of top Japanese companies have been vocal in their support of Britain staying within the 28-nation trading bloc. Recent polls showing more Britons favored exiting the EU roiled the sterling, which dropped to a three-week low versus the dollar on Monday, while the Bank of England said uncertainty surrounding the vote is damping U.K.’s economic growth.
Force a Rethink
“It would be harder to invest in the country should it vote to leave the EU,” said Kazuko Yamazaki, a senior economist at Daiwa Institute of Research Ltd. “Some companies may consider opening other bases around Europe.”
Should the U.K. leave the EU, the biggest destination for international direct investment in the bloc risks more than 107,000 manufacturing jobs likely to be created by 2030 because of the deepening of the the single market, the Centre for Economics and Business Research estimates.
Hitachi Ltd., which opened a train manufacturing facility in the U.K. last year, supports the U.K. staying in the EU, and an exit vote may “force us and similar companies to rethink” their U.K. operations, Chairman Hiroaki Nakanishi wrote in an op-ed in the U.K.’s Mirror newspaper this week.
“We still have a European vision, and would be disadvantaged in pursuing it from the U.K.,” he wrote, adding those advocating Brexit have no answer to how the country could negotiate cost-free access to the huge EU market from a position outside it.

Less Attractive
During a visit to London in May, Abe said a U.K. outside the EU would be “less attractive” to Japanese investors, while Nissan CEO Carlos Ghosn has said that Britain as part of EU makes makes the most sense for jobs, trade and costs. Nissan built a factory in the U.K. three decades ago and exports 80 percent of the cars made there. It employs 8,000 people in the country and has invested more than 3 billion pounds there in total.
“We obviously want the Nissan U.K. plant and engineering center to remain as competitive as possible when compared with other global entities,” Ghosn said in a statement in February. “While we remain committed to our existing investment decisions, we will not speculate on the outcome nor what would happen in either scenarios.” A representative at Nissan said he has no further comment to add beyond those by the CEO.

Europe Access
Toyota Motor Corp., which opened its U.K. factory in 1992, said future investment in the country would be jeopardized and costs would rise should the country leave the EU, according to Tony Walker, a deputy managing director in the country. The investment programs for the next two to three years are not in danger, he said in March. Toyota exports about 90 percent of cars made in the U.K. A representative at Toyota on Tuesday said he has no further comment to add beyond those by the U.K. executive.
Any split from Europe may threaten exports of trains from Hitachi’s new factory in the U.K. to the continent, CEO Toshiaki Higashihara said last month. The company opened the facility to build trains in Newton Aycliffe in County Durham, UK last year and aims to boost employment to 730 people.
“Access to Europe plays a very important role,” Higashihara said on May 18. “We are strongly in favor of staying in the EU.”
A decision for the U.K. to exit the EU would result in prolonged uncertainty and would be credit negative for U.K.-based companies such as the auto, manufacturing, food and beverage, and service sectors. Many companies would probably curb investments until the implications of a Brexit become clear for trade, investment, regulations and labor costs, it said.