Abe Faces One of His Biggest Tests of Salesmanship Yet With Trump

  • ‘We don’t know what he will do next, so we are nervous’
  • Japan had second-largest trade surplus with U.S. in 2016

Morgan Stanley's Sharma on Japan's U.S. Strategy

Prime Minister Shinzo Abe has often spoken of his role as Japan’s top salesman, pitching everything from nuclear power plants to high-speed trains.

He’ll have to draw on that experience over the next few days for one of his biggest tests yet: Selling U.S. President Donald Trump on the merits of a decades-old alliance, while also reassuring voters at home that the billionaire real estate developer is a reliable partner.

The Japanese have watched with mounting unease as Trump exited an Asia-Pacific trade accord and accused the nation of unfair business practices, currency manipulation and failing to pay enough for U.S. troops on its soil.

In a meeting at the White House on Friday and a round of golf at Trump’s Florida estate the next day, Abe must balance the need to defend his country’s economic interests with preserving ties with Japan’s only treaty ally.

“Japan is rattled by Trump,” said Hiro Kishi, a former trade ministry official who is a professor at Keio University. “We don’t know what he will do next, so we are nervous. Trump has gone as far as to say things about the alliance, and Japan wants to preserve the alliance at all costs.”

The stakes are high for Abe: While he remains popular, any missteps could cost him in an election that may come this year.

To read about what Abe plans to say to Trump, click here.

Toshimitsu Motegi, the policy chief of Abe’s ruling Liberal Democratic Party, called for a “win-win relationship” that included cooperation on artificial intelligence, robots, energy and infrastructure rather than just trade.

“Since the 1980s, the U.S.-Japan relationship has become more interdependent, and we need to understand the reality accurately,” Motegi said in an interview in Tokyo on Thursday. “Trump is saying he wants to make America great again. I think cooperation with Japan on various areas, not just trade, will help make America great again.”

Motegi added that he hoped the meetings between Abe and Trump would set an example for other leaders, saying: “The world is paying attention to this summit as uncertainty hangs over the direction of Trump administration.”

Data released this week from the U.S. Commerce Department may make things harder for Abe. The numbers showed Japan had the second-largest trade surplus with the U.S. after China last year, with autos accounting for the bulk of the discrepancy.

Currency, Cars

Over the past few weeks, Abe has pushed back against Trump’s accusations of currency manipulation and criticism over the difficulty in selling U.S.-made automobiles in Japan. He has said it’s inaccurate that Japan is devaluing its currency, and that American cars don’t sell well in Japan in part because of a lack of dealerships, promotion and advertising.

Abe will have his work cut out for him. Trump has made negative statements about Japan since the 1980s, said Michael Green, a former member of the U.S. National Security Council staff and now senior vice president for Asia at the Center for Strategic and International Studies in Washington.

“The yen doubled in value in 1985 and Japanese money just poured into the New York real estate market,” Green said. “His full page ads began appearing in the New York Times and the Washington Post about then attacking Japan for free riding and for cheating on trade.”

“Abe’s mission is to educate Donald Trump about the new Japan and that it’s not the Japan of the 1980s,” he added, to show “Japan is a really stalwart ally.”

Accentuate the Positives

To that end Abe plans to emphasize the positives with Trump. Japan is already the second-largest foreign investor in the U.S., and says it provides more jobs than any other foreign country.

Abe also intends to present an economic plan to Trump that could generate 700,000 jobs, including by investing in high-speed rail and power generation, according to the Yomiuri newspaper. Other measures cited in local media reports include joint development of infrastructure overseas and buying more shale gas to help reduce the trade surplus.

One of the biggest concerns for Abe is defense, particularly as Trump has openly discussed withdrawing U.S. troops from Japan. While Defense Secretary James Mattis sought to assuage concerns on a visit to Tokyo last week -- saying the U.S. will uphold its treaty obligations -- concerns still remain in Japan, which faces threats from China and North Korea.

Trump hasn’t been shy about going after America’s friends. Last week he lashed out on Twitter at a refugee resettlement agreement with key ally Australia, calling it a “dumb deal.” He has also used social media to threaten Toyota Motor Corp. with a “big border tax” if it plans to sell cars made in Mexico to the U.S.

Japanese Unease

Concern is growing in Japan over Trump’s administration, according to a survey by Yomiuri published on Jan. 30. Some 70 percent of respondents said they were worried and thought the U.S. government would have a negative effect on the Japanese economy, up 12 points in both categories from a previous survey in November.

By contrast, a 2009 Pew Research Center Survey found 85 percent of Japanese respondents had some or a lot of confidence in then-U.S. President Barack Obama.

While Abe has won four straight national elections and his approval rating has been steady, forging ties with Trump would give him a boost, according to Lully Miura, a lecturer at the Policy Alternatives Research Institute at the University of Tokyo. Success for Abe would entail making his points on the benefit of multilateral trade deals and getting Trump to engage in “China bashing,” she said.

“If Japan is seen as having simply tried to curry favor with Trump, that would be a failure,” Miura said. “The worst outcome would be if Trump criticizes him on the spot over trade policy.”

— With assistance by Maiko Takahashi, Yoshiaki Nohara, and Margaret Talev

    Before it's here, it's on the Bloomberg Terminal.
    LEARN MORE