Macroscope | Japan and China could forge an alliance that will boost fiscal stimulus to offset recession
- Japan and China could demonstrate to the world that fiscal stimulus is the only way out of the monetary mess we are now in
- Cooperation on building third-country infrastructure could bolster their joint ability to withstand the coming recession
The old year is not ending on an exactly happy note for international relations and it seems that the only thing which might bind major powers (outside the US) closer together in 2019 is their common mistrust of US President Donald Trump. In the case of Sino-Japanese relations, this could be a bigger factor for the common good than is generally realised.
Trade friction between Washington and Beijing is certain to carry over into the New Year and an increasingly isolated and irate US president now looks more likely to pick a trade fight with Tokyo, despite Japanese Prime Minister Shinzo Abe’s illusions about a “special relationship.” China and Japan will thus have good reason to find common cause.
One way this is likely to manifest itself is a willingness by Japan to assist China with its Belt and Road Initiative and a Chinese acceptance of the fact that it could use some help. In a year when Japan will be chairing the G20 process among the world’s leading advanced and emerging economies this could work to the advantage of both nations.
Cooperation between the world’s second biggest economy, China, and the third biggest, Japan, on infrastructure may appear marginal to the economic health of both, and more so to that of the global economy. But given the near certainty of slowing overall economic growth in the US, China, Japan and Europe (to name but a few) it could in fact be very important.
It is almost certain that sales of motor vehicles will take a heavy hit everywhere in the New Year, including the US, Japan and China, even without any “help” from the tariffs that Trump has threatened as part of his reckless trade wars. Cars are often the No 1 consumer item to get hit by a recession of the kind that we face now.
This will be bad news for export-dependent Japan, especially for its already embattled Nissan Motor Corp, as well as for China, and it is a near certainty also that sales and production of most other consumer durables that Japan and China produce in great quantity will take a nasty knock too in early 2019.