Japans $2.2 Trillion Cost Of Befriending Donald Trump – Forbes

Japan's Prime Minister Shinzo Abe listens to U.S. President Donald Trump during a bilateral meeting ... [+] on the sidelines of the G7 summit in Biarritz, south-west France on August 25, 2019, on the second day of the annual G7 Summit.

As political bets go, the one Japans Shinzo Abe made on Donald Trump in 2016 is proving to be a mistake of historic proportions.

No world leader was quicker in getting to Trump Tower in New York to congratulate the U.S. president-elect on a victory few saw coming. Nine days after Trumps shock win, there was Abe on Nov. 17, reassuring a fearful worldnot to worry, hed be a trustworthy leader.

From the start, Prime Minister Abes visit was a comedy of errors. Japanese diplomats are obsessive sticklers for protocol. Trumps people were slow to set a time or any choreography for his first post-election tte--ttewith a world leader. Japanese officialdom was livid that Trump brought his daughter Ivanka along.

The real error, though, was Abes effort to normalize a U.S. leader whos since taken a wrecking ball to the global economic order Abes team hoped to preserve 44 months ago. That order gives Japan a seat at the Group of Seven nations table not accorded to Beijing. And at a cost to Tokyo, so far, of more than $2.2 trillion and counting.

The amount referenced here is how much Abes government is having to spend to revive the economy. To be fair, Japan would be pumping stimulus into the economy even if Trumps White House hadnt so spectacularly botched its Covid-19 response. But the magnitude of the spending, about 40% of gross domestic product, is a direct result of Trumps failure and the global financial repercussions.

For a time, Tokyo-based pundits applauded Abes Trump wager. It seemed like a stroke of realpolitik genius. As Trump railed at China and threatened tariffs, pundits believed, Japan would be spared. Yet once Trump began slapping taxes on steel and aluminum, Japan did not score an exception. Trumps China tariffs, meantime, disrupted the supply chains on which Japan Inc. relies.

Trumps occasional Twitter attacks on a yen he views as too weak panicked Abes Ministry of Finance. Hes cozying up to North Koreas Kim Jong Un, ignoring Tokyos security interests, made for sleepless nights at Abes Ministry of Foreign Affairs. News that Trump cajoled Abe into nominating Trump for a Nobel Peace Prizehumiliated Japans diplomatic corps.

More recent news that Trump cozied up to Chinas Xi Jinping to help win reelection wont sit well with Abes fellow nationalists. An even worse discovery from John Boltons new book The Room Where It Happenedis that Trump tried to shake down Abe for an additional $8 billion annuallyfor hosting U.S. troops.

Donald Trump and China's President Xi Jinping attend a state dinner at the Great Hall of the People ... [+] in Beijing on November 9, 2017.

The former national security advisor detailed times when Trump would rail about Imperial Japans attack onPearl Harborand suggest Abes father was a failed kamikaze pilot. And how Trump dispatched Abe to negotiate with Iranin June 2019 as a lark.

But the real buyers remorse Japan is feeling concerns an economy losing altitude, and fast. In this sense, Trump has been costing Abe all along. The trade war sent powerful headwinds Japans way, steadily chipping away at its best recovery since the 1980s bubble economy imploded.

Granted, Abe made big mistakes of his own. One: not working harder since 2012 to implement big structural reforms to labor markets or Japan Inc.s patriarchal mindset. He failed to cut red tape, catalyze a startup boom or liberalize immigration in ways that wouldve positioned Japan to woo multinational companies tempted to flee Hong Kong as China clamps down on the city. Another: hiking sales taxes to 10% last October, a move that contributed to a 7.3% GDP contraction.

The real problem, though, is a U.S. veering off the rails. With coronavirus cases approaching 3.5 million, its clear Trumps White House has given up on fighting the pandemic. The economic fallout to come will reverberate around the globe, sapping growth in China, Japan, South Korea, Southeast Asia and beyond. So might any steps Trump takes to intensify his trade war between now and the Nov. 3 election to cheer his base.

If Trump cared about pal Abe or other allies, he would announce an immediate trade war ceasefire. Hed get on the phone with G7 and Group of 20 leaders to devise a collective assault on Covid-19and the global fallout on growth and incomes.

Japan is directly in harms way as a leader Abe vouched for hobbles the global economy. The trillions of dollars of stimulus Washington threw at Covid-19 is already wearing off. Even if Democratic rival Joe Biden defeats Trump 110 days from now, itll take time for his White House to repair thedamage done to growth and global economic relationships.

The answer for Abe is jumpstarting reforms to boost Japanese competitiveness, increase innovation and generate growth organically. Two decades after its economy imploded, Japan is becoming more and more reliant on zero interest rates and ginormous spending packages. Yet with approval ratings below 40%, Abe might not have the political capital to get much done.

Theres also a big question of what Trump might do between now and Nov. 3. As he seeks to cheer his base, might Trump slap new taxes on China? Will he make good on threats of 25% tariffs on cars and auto parts, savaging supply chains anew? Trump could weaken the dollar, further ruining Japan Inc.s year.

And have Japanese wondering what, oh what, their leader was thinking when he scurried to Trump Tower 1,337 days ago to do Trumps bidding. The bill for that blunder, $2.2 trillion and counting, will be one for the record books.

Japan's Prime Minister Shinzo Abe speaks to reporters following a meeting with President-elect ... [+] Donald Trump November 17, 2016 in New York City.