2017 Business Trends from the C-Suite
Feb. 6, 2017
The unexpected developments of 2016 and the implications for politics and business have been considerable. Brexit, geopolitical risk in European countries, the Trump presidency, and Japan's ageing society are all factors which will affect business in Japan in 2017.
At a lunch event held at the Grand Hyatt Tokyo on 1 February 2017, a panel of CEOs from diverse industries spoke to BCCJ members and guests about the trends they believe will define the business agenda in 2017. All panelists spoke from a personal perspective and not in their capacity as CEO.
BCCJ President, David Bickle, welcomed the heads of BCCJ Platinum Member companies: Mark Dearlove, CEO of Barclays; Philippe Fauchet OBE; President GlaxoSmithKline K.K. and Magnus Hansson, CEO Jaguar LandRover Japan. Moderator William (Billy) Mallard, Japan Bureau Chief at Thomson Reuters facilitated the discussion.
The Trump presidency
Mallard opened the panel discussion with a reflection on President Trump's recent comments directed at Japan. "President Trump claimed that Tokyo was deliberately weakening the yen to gain an unfair trade advantage over the US. He also told a meeting of pharmaceutical companies this week that Japan, along with China and Germany, were guilty of “global freeloading” for using regulation and currency devaluation in their trade dealings with the US.". The moderator asked the panelists for their thoughts.
Hansson, CEO of Jaguar LandRover, said; "Cars are a contentious issue between the US and Japan, and are convenient for his rhetoric. Earnings prospects facing export-focused Japanese companies are increasingly unclear. The automotive industry, in particular, could take a heavy blow from Trump trade policies."
Hansson added, "Trump's implication is that Japan's closed market and exports to the US are responsible for the decline of the US auto industry and job losses, but this seems to be a lack of understanding on Trump's part. The problem isn't a closed market, but the competition in Japan. The American car industry isn't putting in the effort; there is little product adaptation, no fuel economy, fragmented efforts for distribution strategies, and poor branding."
Fauchet, GSK President, reminded the audience of Trump's declaration that pharmaceuticals are “getting away with murder” in what they charge the government for medicines, which recently sent pharmaceutical and biotech stocks plunging.
Fauchet emphasised that while it is true that the pricing model must change, the industry is committed to saving and improving lives, not taking them. "GSK no longer file drug patents in the lowest-income regions of the world—an integral part of its patient access strategy, and we reinvest 20% of any profits made in the least developed countries into training health workers and building medical infrastructure." he said. "Innovation in healthcare is saving millions of lives and raising the living standard for so many people. Innovation is the raison d'être of our industry. I am concerned about the consequences if Obamacare is abolished and what will happen to those people who no longer have access to treatment. It is something we should observe closely."
Dearlove, CEO of Barclays Japan, expressed his concern about Trump's rhetoric and said the US viewed from a business and financial perspecive was "not as rosy as we might like to believe". He added, "Considering Brexit and the situation in Europe and the US, Japan now seems like a good place to be, but world finance depends on Trump's decisions." The panelist also referred to recent comments made by Bank of Japan Deputy Governor Hiroshi Nakaso who warned that the cost of US dollar funding could easily spike when there is a divergence in the monetary policy direction of the US and Japan. "It is not clear how currencies might be used as "a political hostage".
Brexit and business
Dearlove spoke with confidence about the future of London as a financial centre and pointed out the strong and stable infrastructure of the City including the established set-up of lawyers, accountants, and labour and tax laws. "What clients want to know is what the access will be like to the European markets. The Unknown is what is clouding the future." The speaker raised concern about Europe itself, which also finds itself in a period of instability. "The uncertainty is not restricted to a post-Brexit Britain. Political instability within European countries is on the rise and in many countries, voter behaviour in upcoming general elections is unpredictable - Europe is also tricky for business."
Hansson spoke of the burden of uncertainty, addressed the lack of indigenous talent in the UK, and voiced concern about competitiveness if outside the single market.
Fauchet reminded the audience that the UK has benefitted considerably from European research and development grants in the EU, and if these are no longer available that students might in future choose not to study in the UK, but move to other countries. In terms of science and research, a post-Brexit UK would have to do all it can to prevent brain drain.
All three panelists, however, agreed that this uncertainly also offers the opportunity for countries and businesses to take leadership and demonstrate strength.
Business in Japan
In the subsequent Q&A session, the panelists reflected on the challenges of competing in Japan. Hansson spoke of the formidable maufacturing standards in the country as well as the excellent product quality and services. The speaker emphasised the need to harmonise standards. He praised the Japanese authorities in terms of the steps they had taken to ease the regulations process. "This has enabled more European products to enter Japan which, in turn, provides Japanese consumers with more choice and as a result more competition."
Hansson also mentioned the strong loyalty of the Japanese to Japanese manufacturers and products and that the culture and societal pressures are greater for business in Japan. "I believe this will dissipate in time as more affluent retirees who have always wanted a foreign car will treat themselves, and the younger generations will then follow, even if it takes a while".
Dearlove said that the Japanese must be given credit as the financial services industry in Japan is very open and that Governor Koike has made it clear that she wants Tokyo to be a strong financial capital.
The panelists agreed that in all these debates, it is important for companies to be vocal and to clarify what is important and where they stand. "There are active phases and cooling down phases and while we should voice our concerns, it is important not to react to every Tweet. Communication is vital and we must make efforts to understand, to reflect, and advise" said Fauchet. All three emphasised the necessity for the respect of human rights and clearly stated that diversity and inclusion in business as in society must never be compromised.
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