Dec 26, 2019 (Nikkei) - The best thing you can say about the Japanese economy's 2019 is that, mercifully, the year will soon be over.
Growth plodded along only modestly. Exports had fallen every month in 2019 at time of writing, while wages dropped in seven of the first 10 months. Far from an overwhelmingly expected tapering in 2019, where the Bank of Japan reduces purchases of bonds and other assets, monetary policy remained trapped in negative interest-rate purgatory.
And yet this performance may be the best we can expect as the global trade war marches into 2020 with no end in sight. Three dynamics are coming to a head in ways that spell trouble to come.
One, the export decline is accelerating. The 7.9% year-on-year drop in November, the 12th straight monthly decline, flashes recession warnings. Shipments to China, Tokyo's biggest customer, fell 5.4%, down for the ninth month. Two, Tokyo's rush to throw $122 billion of fresh stimulus at the economy smacks more of panic than fine-tuning. Three, that wild card named Donald Trump.
It should worry Prime Minister Shinzo Abe that U.S. President Trump is hinting that a full China trade deal may be delayed until after the November 2020 election. His suggestion that a deal is contingent on his winning a second term may validate something political observers have long suspected: Trump wants the trade fight with China more than he wants a deal. If so, Asia is in for a chaotic 2020.
Instead of a deal, Trump may very well double down on tariffs, dealing new blows to Japan's vital export engine. It raises the specter, too, of him making good on threats of 25% taxes on imports of cars and auto parts.
These odds increase as Trump's impeachment troubles at home prompt him to lash out abroad -- both to placate his base and change the news cycle. Atop tariffs, Trump could weaken the dollar or expand the list of banned Chinese companies. It is all about maximizing pain. Last month, Trump seemed to revel in his belief that he has "broken" China's supply chains "like an egg."
China's supply chains are really Asia's, though. Japan Inc. is already suffering considerable blowback, making CEOs even less likely to boost wages in 2020.
