Laying Down the Law: Japan’s Message to UK and EU Over Brexit

• By: Staff Editor
• Date: October 11, 2016
• Source: ComplianceOnline

Laying Down the Law: Japan’s Message to UK and EU Over Brexit

“There are numerous Japanese businesses operating in Europe, which have created 440, 000 jobs. A considerable number of these firms are concentrated in the UK. Nearly half of Japanese direct investment intended for the EU in 2015 flowed to the UK, and the UK was one of the major destinations for Japan’s investment stock within the EU as of the end of last year.”

                                                                                                                  - Ministry of Foreign Affairs of Japan

For the first time since 2013, the yen that is widely regarded as a safe haven amid crisis, exhibited imbalance as news of Brexit broke out in June. Investors bought the yen and concurrently dumped Japanese stocks. The steep increase in the value of its currency made it that much tougher for the Bank of Japan to control inflation with Japan’s imported goods becoming cheaper.

While Japan, the world’s third largest economy, struggled to regain its equilibrium, the world offered its view on Brexit and speculations ran rife over UK’s strategy, the focus even shifting momentarily from the referendum to who would lead Britain in its monumental decision.

It was also the time Japan needed to weigh out its investment in UK and the EU. Promptly-timed ahead of the G20 Summit in China, Japan released its 15-page message to the duo, which many see as a warning, listing its demands and chiefly highlighting Japan’s business rapport with the European Union as well as the UK.

Leading Japanese companies, including Nissan, Fujitsu and Hitachi, function with their European headquarters in the UK and EU. These businesses account for about 140,000 jobs in the UK specifically. If the Japanese interests are not met, the letter reiterates that a reflex action could be moving their headquarters elsewhere, effectively dislodging the economy and depriving it of jobs.

Some of Japan’s areas of interest represented in the letter include:

• Maintenance of the current tariff rates and customs clearance procedures
• Maintenance of the access to workers who are nationals of the UK or the EU
• Maintenance of the freedom of establishment and the provision of financial services, including the single passport system
• Maintenance of the freedom of cross-border investment and the provision of services as well as the free movement of capital, including that between associated companies
• Maintenance of harmonization of the regulations and standards between the UK and the EU
• Maintenance of the current level of information protection and the free transfer of data
• Unified protection of intellectual property rights

Topping the list of general requests Japan has directed towards both the UK and EU is to ensure transparency of the Brexit negotiations – one that other economies have sought as well – amid a collapse in the clarity of discussions in the Theresa May camp. Understandably the other appeals revolve around granting sufficient time periods for an easier transition and maintaining the free trade system.

While the US stands first in its economic ties with the UK, Japan’s investments in the UK are considerable – both in the financial and business spheres. Japan’s letter strikes raw and hard, but in essence, it echoes the US’ perspective well ahead of Brexit.

Data Security Concerns

Another concern is data security as UK might formulate its own data security regulation. But it is imperative for the UK and the EU to regain the confidence as soon as possible and be competitive by getting in to more predictable mode of the Brexit process, incorporating as much possible terms of earlier EU laws which are directed at business process, data privacy, free trade in the new legislations to be formed exclusively for UK. This will avoid unpleasant surprises and risk of uncertainty. Moreover as the British Data Protection Law is going to take time to come, all companies should voluntarily follow General Data Protection Regulation (GDPR) whether doing business with EU or not.