Japan’s economic stability is under scrutiny due to varied pressures from China and the U.S., the nation’s main trade allies.
Fukutome warns of dual threats: deflation from China and potential U.S. inflation, especially amid the prospect of Trump’s policy resurgence.
Trade dependency makes Japan susceptible to external economic trends.
For instance, cheaper Chinese steel and chemicals might undercut local production, while U.S. tax reductions could trigger price hikes.
Fukutome identifies U.S. inflation as a primary concern, fearing it could lead to higher long-term interest rates—a situation he sees as unlikely yet alarming.
Japan’s monetary policy shift from negative interest rates is anticipated to proceed smoothly, avoiding economic disruption or market unrest.
Yet, the Bank of Japan’s tightening, coupled with anticipated U.S. Federal Reserve rate cuts, raises fears of market instability due to their divergent monetary paths.
Fukutome, also CEO of Sumitomo Mitsui Banking Corp., expresses concern over the unprecedented financial market volatility resulting from these global policy shifts.
On domestic fronts, he advocates for more flexible banking regulations to aid startups.
Current rules limit banks’ equity investments in young companies, hampering financial support for innovative sectors, particularly in deep tech.
By encouraging deregulation, Fukutome aims to bolster equity financing for startups, facilitating broader economic growth and innovation.
This approach marks a strategic pivot as Japan seeks to balance domestic financial health with the complexities of global economic relations.