Sunday 4 September 2016

Japan's statement on Brexit

The Japanese government today issued a very stark warning to the UK about the consequences of Brexit. Described by Sky News as “unprecedented”, the detailed statement made clear that Japanese investment in the UK (which accounts for about half of all Japanese investment in the EU) was contingent on a Brexit-lite type deal in which the UK remains in the single market and accepts free movement of labour. Japan is important to both manufacturing and services, having major stakes in both the car, pharmaceutical and financial services sectors.

This is highly significant, because the Brexit case has always discounted the impact on foreign investment, insisting that warnings from Japan and other countries that they would disinvest were just part of ‘Project Fear’. The statement is also important because it links together (in its reference to “rules of origin”) UK membership of the single market with UK access to the trade deals done by the EU, which would cease to exist on exit, even Brexit-lite (because they are deals between the EU and third parties, whereas Brexit-lite would mean EEA membership of the single market, rather than EU membership).

For hardcore Brexiters, any economic price is worth paying for hard Brexit. Is that likely to be true for the British people as a whole? I doubt it. So Japan’s statement surely ratchets up the pressure on Theresa May to deliver Brexit-lite, as the least-worst form of Brexit.

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