Slow and Steady Wins the Race? Pondering the Japanese Corporate Reaction to Brexit
In 2016, the United Kingdom (UK) voted to leave the European Union (EU). “Brexit” fueled considerable anxieties in the Japanese business world, which is the second largest source of foreign direct investment (FDI) in the UK. This was hardly shocking given the latter’s extensive involvement in the UK. But Brexit has thrown the existing state-of-affairs into great uncertainty with Japanese companies in the UK almost completely unclear about the future operating environments they will face. There are some companies like Mitsui Sumitomo Financial Group, Muji, and Panasonic that have shifted or will move operations elsewhere within the EU. Yet, even though the UK is supposed to leave the EU next year most Japanese companies remain firmly planted in the UK. Of course, one would not expect the 1000+ Japanese companies in the UK to have uprooted immediately after 2016. After all, there was hope that the British government could be convinced, partly through lobbying by and warnings from Japanese officials, business associations, and top Japanese companies, to negotiate more favorable exit terms from the EU. Furthermore, some companies like Nissan and Toyota received special promises from London about increased auto sector funding which made it more palatable for them to remain in the UK. Beyond this, the time and monetary costs associated with breaking existing arrangements surely could not be attractive. Lastly, some Japanese companies are focused on UK consumers and the government. Still, one wonders if it really makes sense for so many companies to have waited so long and, reportedly, “Japanese companies [now] are advancing preparations…for a potentially chaotic Brexit.” Perhaps the root cause of Japanese corporate inertia was the misplaced hope that economic logics would trump political ones. Corporate managers get “office politics,” but still seem insufficiently aware of the dangers flowing from other forms of politics.