Trump’s America & Abe’s Japan – Concrete Proposals

Japanese Prime Minister Shinzo Abe is poised to be the first global leader to present President Trump with a concrete policy proposal that is designed to shape and promote Trump’s “America First” agenda and, at the same time, to advance the US-Japan alliance.

After meeting the then President-elect for the first time on November 17, Abe will meet Trump for the second time on 10-11 February and PM Abe appears very determined to impress the President by offering a concrete “deal” so that both countries can move from talk to action.

According to WisdomTree, Trump’s America and Abe’s Japan are a “Match Made in Heaven” not just because both leaders share a basic “strongman leadership” and “my country first” philosophy, but because the economic and financial agendas are very much aligned: Team Abe is determined to make Trump look good by offering “funded by Japan” but “built by America” infrastructure projects. At the same time, Prime Minister Abe is expected to propose that the US-Japan bilateral trade and investment relationship becomes a blueprint for a new global trade and investment agenda.

Specifically, according to Japan’s largest circulation newspaper, Yomiuri Shimbun on February 3, PM Abe is preparing to offer a comprehensive “US-Japan Economic Cooperation Plan”. At the bottom line, this deal is designed to create a US$450 billion market in the US through railway and infrastructure investments and create up to 700,000 US jobs over a ten-year period. Japan would offer to seed-fund these projects with low-interest loans, mobilising resources from Japan’s public pension fund and other public lenders.

In addition, the plan proposes that the US and Japan work together to create new cross-border trade rules covering all aspects from e-commerce, intellectual property, government procurement, labour and financials, among others. In other words, after President Trump pulled out of the Trans Pacific Partnership, Prime Minister Abe will likely propose that the bi-lateral US-Japan framework asserts itself as the new forward-looking model for President Trump to lead global economic developments.

In detail, PM Abe’s deal for Trump reportedly focuses on five common goals for the US and Japan:

1) developing the world’s most advanced infrastructure in the United States (high-speed railway projects in Texas, California and the Washington-Boston North-Eastern corridor);
2) using US infrastructure development as a platform for joint-leadership in supplying global infrastructure demand;
3) leading the development of robots and artificial intelligence and their applications;
4) collaborating in new frontiers, such as space development;
5) cooperating more closely on defence, and security systems development and security strategy.

Investment implications

The most immediate and concrete part of the proposal focuses on infrastructure projects as well as investment into applied robotics. Japan’s capital goods sector is thus poised to benefit most directly.
In addition, the greater and deeper the Trump-Abe relationship develops, the lower the risk of erratic bi-lateral frictions should become. Specifically, the more positive US-Japan economic cooperation, the less likely it should get for Japan to be suspected of manipulating its currency.

Jesper Koll – Head of WisdomTree in Japan