Wednesday, 22 April 2015

Japan Inc echoes government’s wary stance towards China-led AIIB – Reuters poll

In World Economy News 22/04/2015

Nearly three quarters of Japanese firms believe Tokyo should join the China-led Asian Infrastructure Investment Bank (AIIB) only if governance conditions are met, a Reuters poll found, a view that supports the government’s cautious stance on signing up as a member.
The plans for the new bank, seen as a significant setback to U.S. efforts to extend its influence in the Asia-Pacific region and balance China’s growing financial clout, have put Japan in a quandary.
It does not want to alienate Washington, its closest ally, or bolster rival China especially at the expense of the Asian Development Bank, the Manila-based multilateral institution dominated by Japan and the United States. But opting out of the AIIB could also weaken its own clout longer-term in the region.
Fifty-seven countries, including Britain, Germany and France, put up their hand to be AIIB founding members. Japan and the U.S. were notably absent, citing the need for better transparency and higher governance standards although they can still join at a later date.
The Reuters Corporate Survey, conducted April 1-15, found 72 percent of companies said Japan should join the AIIB if concerns about governance are resolved, while a quarter of respondents saw no need to participate.
Just 4 percent want Japan to join unconditionally, according to the poll of 483 large and mid-sized companies. Around 250 firms answered questions on AIIB.
But the survey results also highlighted the limited direct benefits to Japanese companies from the types of loans provided by development banks, as Japan Inc specialises in higher quality, higher cost projects with more elaborate specifications.
Some 84 percent of firms said that their businesses would not be at a disadvantage if Japan decided not to participate.
“We see neither advantages nor disadvantages. The AIIB seems to be aimed at facilitating a Silk Road economic belt,” one manager at a real estate firm responded, referring to Beijing’s plan to boost transport links across Asia.
“Japan stands no chance of beating the competition in terms of costs for road, railway and power supply projects anyway,” he wrote.
Data showed that Japanese firms received just 0.26 percent of the goods and works contracts backed by loans from the Asian Development Bank. Indian firms were the biggest beneficiaries, receiving 24 percent of the contracts while Chinese firms ranked second, receiving 22 percent.
“Japanese companies are taking a calm and pragmatic view towards the AIIB and infrastructure demand,” said Toru Nishihama, chief emerging market economist at Dai-ichi Life Research Institute, who reviewed the survey results.
“They know all too well know that they cannot make quick money out of the AIIB.”
But even though Japan Inc does not have much to lose, the Asian Development Bank is also a symbol of Tokyo’s economic leadership in the region and its governorship has always been filled by a high-ranking Japanese bureaucrat – whose ranks have included central bank chief Haruhiko Kuroda.
Some respondents noted that the AIIB could give European firms an edge over Japanese counterparts in negotiations in Asia and that Japan risked missing out on growth in the region if it opted out.
The survey, which is conducted for Reuters by Nikkei Research, also showed that 62 percent of firms do not expect to raise prices this financial year – little changed from January’s survey results.
Higher prices for goods and services are a key goal for Prime Minister Shinzo Abe’s plan to beat decades of deflation and stagnant growth, but the poll results underscore Japan Inc’s weak pricing power just as consumer inflation has ground to halt on slumping oil prices.

Source: Reuters (Editing by William Mallard and Edwina Gibbs)