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Nearly 90% Of Japanese Companies View Trump’s Policies As Detrimental To Business

Nearly 90% of Japanese businesses anticipate negative fallout from U.S. President Donald Trump’s policies, according to a Reuters survey, underscoring mounting concerns from the world’s fourth-largest economy. As Japan remains a critical investor in the U.S. and heavily dependent on China for trade and manufacturing, the prospect of rising tariffs and escalating trade disputes is casting a long shadow over corporate strategy.

Majority Of Firms See Business Climate Worsening

In a survey conducted by Nikkei Research for Reuters between February 4 and February 14, 86% of Japanese firms reported that Trump’s policies would harm their business environment, compared to just 73% who expressed similar concerns in December. The findings signal growing unease over protectionist measures and geopolitical tensions.

Of the companies voicing concerns, 72% pointed to Trump’s aggressive trade stance—particularly his push for higher tariffs—as the biggest threat, while 26% cited worsening U.S.-China relations as a key risk factor.

Tariffs Loom Large Over Japanese Industry

Trump’s tariff-heavy approach to trade has already left its mark. His administration has imposed a 25% tariff on steel and aluminum imports, slapped a 10% duty on Chinese goods, and threatened hefty levies on Canada and Mexico. Plans for reciprocal tariffs targeting countries that impose duties on U.S. exports add another layer of uncertainty.

While Japan does not tax foreign car imports, Washington has long argued that non-tariff barriers hinder U.S. automakers’ access to the Japanese market. In a fresh warning on February 20, Trump suggested auto imports could face a 25% tariff as early as April, sparking fears of widespread economic ripple effects.

“If global auto tariffs take hold, semiconductor sales could also take a hit,” cautioned an executive from a Japanese electronics firm, highlighting potential collateral damage to key industries.

Deregulation And Energy Policy Find Some Support

Not all respondents viewed Trump’s policies as entirely negative. Among those who saw potential benefits, 37% pointed to deregulation and tax cuts, while an equal percentage cited his support for fossil fuel production as a positive for business.

Despite broader concerns, 80% of surveyed companies said they had no immediate plans to alter their U.S. investment strategies, though 16% signaled a more cautious approach. During a recent meeting with Japanese Prime Minister Shigeru Ishiba, Trump encouraged Japan to pour more capital into U.S. energy and technology sectors. The discussions also touched on Nippon Steel’s $14.9 billion bid for U.S. Steel, with Trump suggesting the deal might transition from an outright acquisition to an investment.

Japan’s Interest Rate Hike Sparks Debate

The survey also gauged corporate sentiment on the Bank of Japan’s (BOJ) recent rate increase. While 61% of respondents supported the move, 25% believed it was premature, and 15% thought it came too late.

In January, the BOJ raised rates from 0.25% to 0.5%, citing progress toward its 2% inflation target. Some business leaders expressed concerns about the prolonged weakness of the yen, with one wholesale executive arguing that further hikes were needed to curb capital outflows.

Looking ahead, 24% of companies expect the next rate hike between July and September, while another 24% favor waiting until 2026 or later. Meanwhile, an equal percentage said no further rate increases should happen at all.

BOJ board member Naoki Tamura recently pushed for raising rates to at least 1% in the second half of the upcoming fiscal year, a move that has left businesses divided. While 44% of firms warned that a 1% interest rate could dent capital spending, 21% said the threshold for concern would be 1.5% or higher.

As Japan navigates trade tensions, monetary policy shifts, and global economic uncertainty, its corporate leaders face a challenging road ahead—one defined by caution, adaptation, and resilience.

ECB Moves to Ease Rules for Smaller Banks Without Weakening Supervision

The European Central Bank is preparing a significant broadening of proportionality in banking supervision, a move that could bring roughly 150 additional smaller institutions into a lighter regulatory framework, according to ECB Executive Board member Frank Elderson.

In a post on the ECB’s supervision blog, Elderson, who also serves as vice-chair of the Supervisory Board, said the goal is to reduce the regulatory burden on small and non-complex institutions while preserving the safeguards that support financial stability.

A More Flexible Approach To Supervision

Rather than creating a separate rulebook for smaller lenders, the ECB’s proposals would expand the existing framework for small and non-complex institutions, or SNCIs, by broadening eligibility and easing the frequency and intensity of certain supervisory tasks.

Elderson argued that Europe’s varied banking sector is a strategic strength. Smaller, locally focused banks, he said, play a critical role in financing households and small and medium-sized enterprises, which in turn supports innovation, employment and investment across the region.

“These institutions play an important role in financing households and small and medium-sized enterprises, helping innovative ideas become successful products and supporting jobs and investment across the region,” Elderson wrote.

He added that a banking system combining different business models, sizes and areas of expertise is better positioned to meet the financing needs of the European economy and, by extension, support competitiveness.

Why Proportionality Matters

The ECB’s approach rests on a simple principle: regulatory requirements should be calibrated to a bank’s size, complexity and risk profile.

At the same time, Elderson cautioned that smaller banks are not insulated from the pressures facing the wider financial system. He pointed to geopolitical risk, cyber resilience in the era of advanced artificial intelligence, digitalisation and climate- and nature-related risks.

“Depositors in smaller banks should be just as confident that their savings are safe and their bank is well managed, resilient and subject to robust risk management standards as those in larger institutions,” he wrote.

The central bank believes a more targeted framework would allow smaller lenders to devote more resources to the risks that matter most, while trimming compliance work that adds cost without materially improving resilience.

A Wider Definition Of Small Banks

The most consequential proposal would broaden the definition of what qualifies as a small bank.

Today, the SNCI framework covers 75% of all less significant institutions under European banking supervision, representing more than 1,400 entities as of December 2025.

Under the ECB’s proposal, national authorities would be able to lift the current €5 billion total-assets threshold for SNCI status to as much as €10 billion, depending on the size and structure of domestic banking sectors.

The ECB also wants the definition of “non-complex” to better reflect how banks operate in practice. Elderson noted that some institutions, especially in smaller member states, fail to qualify as SNCIs because of technical features in their recovery and resolution arrangements, even when they are not complex from a resolution standpoint.

Taken together, the changes could result in as many as 85% of less significant institutions being classified as SNCIs, bringing about 150 additional banks into the lighter framework.

The ECB also wants the SNCI label to be used more consistently in future European banking legislation, with new and amended rules spelling out more clearly how they apply to smaller and non-complex institutions.

Less Frequent Supervisory Reviews

The changes would not stop at classification. The ECB is also proposing a more selective approach to supervision itself.

The Supervisory Review and Evaluation Process, or SREP, could be carried out less frequently for some institutions. Elderson said certain banks might go two to three years without a full SREP if their risk profile justifies that approach.

That flexibility would remain subject to supervisory judgment, meaning banks could still face more frequent scrutiny if their risk warrants it.

“Where risks are low, some supervisory assessments will in practice be carried out even less frequently, reducing the burden on banks without undermining supervisory effectiveness,” Elderson wrote.

The ECB is also seeking to reduce the burden of stress testing. Bottom-up stress tests, in which banks run their own projections and submit them to supervisors, would be used only selectively for SNCIs. Supervisors would rely more heavily on top-down exercises, with projections carried out centrally.

That shift could meaningfully reduce the workload for nearly 1,000 SNCIs that are still subject to bottom-up stress tests.

Reporting Could Be Cut Dramatically

Reporting is another area targeted for simplification.

The ECB said its systems have already been adapted to support a materiality threshold for reporting resubmissions once the relevant legislative changes are in place.

A new SNCI category is also set to be introduced into the ECB’s FINREP regulation from 2027, beginning with a public consultation.

Under the proposed revisions, the volume of financial reporting required from SNCIs could fall from around 13,500 data points to roughly 700.

Updates to the European Banking Authority’s technical standards on supervisory reporting are also expected to remove redundant templates, eliminate overlaps and exempt SNCIs from certain reporting requirements.

More Flexibility On Governance

The ECB is also pushing for a more proportionate approach to governance requirements.

Supervisors would make greater use of existing flexibility to reflect a bank’s risk profile and operational complexity.

That could allow certain committees to be merged, including nomination and remuneration committees, while functions such as risk management and compliance could also be combined where appropriate.

The proposals would also create more room for flexibility around pay rules, including possible exemptions from requirements to defer variable remuneration or pay it in financial instruments.

Periodic independent reviews of remuneration policies could also be outsourced and applied in line with the sophistication of a bank’s internal stress-testing framework.

Why Smaller Markets Stand To Benefit

The proposals may be especially relevant to smaller European banking markets, even though the ECB has not identified which national authorities would choose to raise the €5 billion threshold.

Cyprus, for example, has a relatively small banking market and its domestic institutions fall under the European banking supervision framework. Any decision to apply the higher SNCI threshold would therefore depend on the applicable rules and supervisory assessment.

Elderson was explicit that the changes should not be read as a weakening of core safeguards.

“Proportionality should not be mistaken for reducing prudential standards for smaller banks,” he wrote. “The aim is not to lower standards, but to achieve them in a more efficient and proportionate manner.”

The ECB also said any simpler regime for smaller banks must be matched by a credible, flexible and efficient crisis management framework.

In Elderson’s view, trimming administrative overhead would free up scarce resources for risk management, customer service, investment in competitiveness and operational efficiency.

“By reducing undue complexity and the administrative burden for small and non-complex banks, these measures can support the competitiveness of Europe’s diverse banking sector, without compromising resilience,” he wrote.

What Comes Next

The ECB is preparing to implement the simplification measures within its authority. It will also work with European institutions on changes that require action beyond the central bank, including initiatives under development through the European Banking Authority.

For Elderson, the proposals are part of a broader push to streamline European banking supervision, not just for smaller institutions but across the system as a whole.

“Our goal is clear: to make our supervision more efficient, more effective and more risk-based, while continuing to preserve banks’ resilience,” he wrote.

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