Japan braces for a Trump trade war it can ill afford

TOKYO – The wave of panic coursing through the boardrooms of Toyota, Honda, Nissan and other Japan Inc icons dramatizes why Prime Minister Shigeru Ishiba is dreading 2025.

Since October 1, Ishiba has been trying to find his footing as Japanese leader. Donald Trump’s resounding election win roughly a month later made that challenge infinitely harder for Ishiba’s embattled Liberal Democratic Party, which has seen its approval ratings drop into the low 30s.

News that Trump is wasting no time rolling out his next trade war adds to the headwinds zooming Tokyo’s way. Not only will that hit the economy’s 2025, it is also already making life more difficult for the Bank of Japan.

Until recently, Governor Kazuo Ueda argued the BOJ would be hiking rates again – perhaps at the December 18-19 board meeting. The “Trump trade” arriving early could change that calculus, and fast.

Trump’s next trade war will be “very destructive to the world economy,” predicts economist Gary Hufbauer at the Peterson Institute of International Economics, a Washington-based think tank.

Even before Trump announced on November 26 that he plans to slap levies on Canada and Mexico in addition to China, Ishiba’s government was racing to pass a fresh US$250 billion economic stimulus package. The plan aims to boost incomes at a moment when inflation is uncomfortably above the BOJ’s 2% target.

There will probably be much more stimulus where that came from as Trump’s next trade war puts Ishiba’s economy in harm’s way and destabilizes China’s shaky economy even further.

In Beijing, President Xi Jinping’s efforts to boost growth aren’t gaining traction as hoped. In October, China’s industrial profits fell 10% year-over-year. That was after a 27.1% decline in