By Kiyoshi Takenaka

Tokyo (Reuters) –

Nearly three-quarters of Japanese companies expect Donald Trump’s next term as U.S. president to negatively impact their business environment, citing planned tariff hikes and U.S.-China trade tensions as primary concerns, a Reuters survey showed.

Trump returns to the White House in January, having threatened tariffs exceeding 60% on U.S. imports of Chinese goods. A Reuters poll of economists predicts these initial tariffs might be imposed early next year, with a median estimate of 38% and projections ranging from 15% to 60%.

Additionally, Trump has indicated potential levies of 25% on goods from Canada and Mexico, where several Japanese automakers have manufacturing plants. A manager from a machinery manufacturer noted, “It’s hard to predict his policies, and that makes it difficult for our client companies to make investment decisions.”

While 73% of respondents predict Trump’s second term will not benefit their business environment, others anticipate positive impacts due to expected increases in U.S. domestic demand from tax cuts and likely revisions to energy and environmental policies.

When asked what actions they might take if Trump raises tariffs, two-thirds of respondents said their business strategy would likely remain unchanged, 22% indicated they would cut costs, and 8% would seek to expand in markets outside the U.S.

The survey was conducted by Nikkei Research for Reuters from Nov. 27 to Dec. 6, reaching out to 505 companies, with 236 responding anonymously.

Despite concerns regarding a second Trump administration, half of respondents expect an increase in earnings for the next financial year. About 20% anticipate a decline, while the remainder expect earnings to remain steady.

Approximately 1,000 listed Japanese companies saw a combined net profit increase of 15% in the six months leading to September, according to an analysis by Nikkei. Banks benefitted from rate hikes, albeit still at low levels, and shippers gained from higher freight rates, while hotel and railway operators experienced a surge in inbound tourism.

About 60% of the respondents in the Reuters survey forecast the dollar will trade between 140 yen and 150 yen by 2025. The yen has struggled for years, influenced by the significant disparity between high U.S. interest rates and Japan’s low rates, reaching a nearly four-decade low of 161.96 to the dollar in July. However, it has rebounded to around 151 yen due to official intervention and Japan tightening its monetary policy concurrent with U.S. loosening.

Regarding Bank of Japan Governor Kazuo Ueda’s management, slightly over half of respondents have a positive view of his ability to normalize BOJ monetary policy post the cessation of negative interest rates in March. This is in contrast to 24% who do not trust Ueda’s capabilities.

The BOJ raised its short-term policy target to 0.25% in July, and just over half of economists surveyed by Reuters last month expect the BOJ to raise rates again next week.