Just as we are seeing the final days of 2018 fade away, much like the index prices in the Nikkei 225 and Topix, the trade tensions and the fear that these tensions could cause are likely to add to the downside slide here in Japan. The stock market could come out early in 2019, producing a rally but when the unresolved trade issues are tabled, the reversal and sell-off could be fast and furious. Note that on the last day of trading, Friday, the broad Topic index fell 7.54 points or 0.50 percent to close at 1,494.09. Markets will surely be volatile in the coming weeks.
When trade becomes a political football, as it has in the past 12 months, the shocks to stock prices can be shockingly fast. The recent agreement to hold off on raising tariffs for 90 days helped clam markets but again, this discussion is by no means settled. And because of these trade tensions, between the US and China, Japan is not in the mix as both Japan and China have mighty export businesses. Now the Organization for Economic Cooperation and Development lowered its growth forecast for 2019 from 3.7 percent to 3.5 percent – again on new global trade concerns.
Japan and China have seen their trade volumes increase over the past decade, so any slowdown in the Chinese economy or any tensions that hinder trade with the second-largest economy in the world would have negative impact on sectors in Japan such as marine transportation, iron and steel, and machinery. And right now, due to a slower increase in investment in fixed assets including spending on property construction and infrastructure, the July – September growth rate for the Chinese economy was at 6.5 percent, the slowest in 9 years. China is now facing several challenges that in the long run, could impact Japanese trade. With the expanding influence in the South China Sea, China will be asking for others in the region to respect its position – but can Japan do that? It remains to be seen.
Trade, economic weakness and other key issues will be discussed here in Tokyo with regards to China – as the relationship only deepens each year.