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Japan

Brexit Deadlock Spooks Asian Corporate Heavyweights

Economic headaches ahead
Economic headaches ahead

The growing alarm after UK Prime Minister Theresa May's Brexit deal suffered a defeat in Parliament isn't just unsettling for British politics. Global businesses are on edge as well.

Asian companies, whose operations and investments stretch far into Britain and the European continent, have a lot at stake as they face higher tariffs and costs. Tuesday's setback will do little to cure the anxiety. Chancellor of the Exchequer Philip Hammond has sought to assure business leaders that their no-deal nightmare scenario could still be avoided, but with only 10 weeks left before the UK is due to leave the European Union, companies are bracing for a potential hard exit.

A hard Brexit would seriously impact European operations.

"Japanese companies should have been making preparations for the possibility of a hard Brexit, but now the reality of carrying out those measures is getting closer," Hiroaki Nakanishi, chairman of the country's largest business lobby Keidanren, told reporters in Tokyo Wednesday.

Here's what Asian companies are saying about Brexit:

Honda

The Japanese automaker said Wednesday that a hard Brexit would seriously impact its European operations, even though it is implementing countermeasures. New checks at the border could disrupt its logistics systems, while tariffs on goods moving between the EU and UK would hurt its competitiveness, it said. "We now look to the government to deliver a clear, legally certain path forward to avoiding no deal and to delivering the conditions that support the continued competitiveness and productivity of our sales and manufacturing operations," it said.

Honda's Tokyo HQ — Photo: Rs1421

About 4.5% of Honda Motor Co."s sales come from Europe, and it has one factory in the UK with manufacturing capacity of about 150,000 units annually.

Sony

Sony Corp., grappling with questions over its employees and distribution and sales channels, said Wednesday it is closely monitoring the Brexit news. Its European head office is located southwest of London in the town of Weybridge. The Japanese technology giant has a sales office and a factory in the UK

Panasonic

Panasonic Corp. said Wednesday that it's preparing for different scenarios to limit the impact on its operations. It shifted its Europe head office from near London to Amsterdam on Oct. 1, and transferred about 10 people from the facility as well. The move was made partly to ward off potential negative effects of Brexit and also because the electronic maker's holding company was already based in the Dutch city, it said in August. The company, which produces televisions, digital cameras and tablets in the UK, won't move its factory, a spokeswoman said in October.

CK Group

The CK Group has one of the highest exposures to the UK among Asian business empires, with operations there ranging from ports to infrastructure, telecommunications and retail. Its billionaire founder, former Chairman Li Ka-shing, has warned that Brexit would bring considerable challenges to the UK and Europe for years.

The country remains the group's biggest profit and revenue generator.

Li's son, Victor, who took over as chairman of the group last year, has echoed the cautious view. In a speech to employees in January, the younger Li cited Brexit as one the big political and economic challenges that CK will need to weather through this year.

CK, which operates the Three mobile network and Superdrug stores in the UK, has reduced its exposure to the UK since the 2016 shock referendum but the country remains the group's biggest profit and revenue generator. At the CK Hutchison Holdings Ltd. flagship, 19% of total sales and 30% of earnings before interest and taxes came from the UK in the first half of 2018, the company's most recent financial report. That's down from 21% and 39%, respectively, two years earlier.

Asahi

Asahi Group Holdings Ltd., Japan's largest brewer, owns and sells European beer brands Peroni and Grolsch in the UK — picked up from Anheuser-Busch InBev NV in a deal worth $2.9 billion in 2016. In the event of a hard Brexit, its Peroni brand would likely be impacted due to its large presence in the British market — the beer is brewed in Italy and exported to the UK Asahi's flagship Super Dry is also made in Italy and exported to the UK, but it still has only a fledgling presence in the beer market there. A company spokesman said Asahi is focused on strengthening its name as a premium beer brand in the UK market, and said it was too early to comment on any potential business impact.

Nomura

Nomura Holdings Inc., Japan's biggest securities firm, plans to ask fewer than 100 of its London-based staff to move to Europe in preparation for Brexit.

Ensuring everything will continue without disruption.

The firm said Wednesday it's "making arrangements to ensure that all current client and counter-party relationships, and access to Nomura's services, will continue without disruption after the UK leaves the EU,"" it said. It's proceeding on the assumption that UK-based financial services firms will lose so-called passporting rights to operate in the bloc. Nomura, which chose Frankfurt as an EU base after Brexit, has about 3,000 employees in the region and most work in London.

Mitsubishi UFJ

Mitsubishi UFJ Financial Group Inc., which has about 2,000 staff in London according its website, has been preparing for Brexit by setting up some operations to Amsterdam. Japan's biggest bank already does commercial banking in the Dutch city and got a securities license there in December, calling it a "major step" to continue providing services to clients in Europe after the UK leaves the union. The company is closely monitoring Brexit developments, spokeswoman Kana Nagamitsu said on Wednesday.


With assistance by Kiyotaka Matsuda, Lisa Du, Yuki Hagiwara, Yuki Furukawa, Jie Ma, Masumi Suga, Pavel Alpeyev, and Takashi Nakamichi

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FOCUS: Russia-Ukraine War

War Of Attrition, Western Fatigue, U.S. Election: Clock Is Ticking On Ukraine's Fate

Russia is hoping that the West’s support for Ukraine will begin to falter. Kyiv knows this, and is therefore trying to obtain long-term aid agreements — which have the potential to determine their future. But the current Poland-Ukraine row is a troubling sign.

Photo of Ukrainian soldiers on a reconnaissance mission at an undisclosed location in Ukraine.

Ukrainian soldiers on a reconnaissance mission at an undisclosed location in Ukraine.

Piotr Andrusieczko

-Analysis-

WARSAW — It's been four months since the Ukrainian Armed Forces mounted their counteroffensive in southeastern Ukraine. The fighting is extremely difficult, and Ukrainian soldiers must make their way through kilometers of mines and fortified lands occupied by Russia.

Few would argue that Ukrainian army’s effort would be more effective if they had modern planes, including the F-16 fighter jets they were promised after several months of negotiations (they will receive the first ones in 2024, at earliest). Ukraine is also seeking long-range missiles: whether a U.S. arsenal of ATACMS missiles, which have a range of 300 kilometers, or Germany's Taurus cruise missiles with a range of over 500 kilometers. For now Washington and Berlin have balked on delivery.

Stay up-to-date with the latest on the Russia-Ukraine war, with our exclusive international coverage.

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There was more bad news this week for Kyiv amid a dispute over grain exports with its neighbor and ally Poland, which announced that it wouldn't send new weapons systems to Ukraine, though it will continue to fulfill its existing deals.

But Kyiv has also been facing problems with arms that it has already been promised. In a recent interview with CNN, Ukrainian President Volodymyr Zelensky said that it's now been months that many of the arms Ukraine has been promised have been in an “on-their-way” status.

The Western supplies of arms to Ukraine are not only key to helping their efforts in the counteroffensive. Russia, having a numerical advantage, is trying to wage a war of attrition: wearing down Ukraine until its army has no choice but to collapse. For Radosław Sikorski, a Polish member of the European Parliament, who took part in the recent Yalta European Strategy (YES) conference in Kyiv, said the West must remember what's at stake even more when the battle hardens.

“It’s paradoxical that the human willingness to help is strongest when the victim of aggression is successful, but as soon as they start to have problems, it falls," Sikorski said. "But it is exactly this logic that we must be opposed to. Now is exactly the moment to show our true character: that we are with Ukraine until the end, and not only when things are going well.”

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