Now they want to misrepresent Margaret Thatcher’s offer to Japanese companies

Amidst all the negative lectures on the fall in sterling as a result of Brexit the gloom mongers ignore the movements of sterling against the yen, despite the yen being one of the world’s big four currencies with the dollar, Euro and pound. The renminbi has recently joined that top grouping at the IMF but there are still controls on financial markets in China.

I guess they ignore it because you could get 140 yen for each pound on 2nd January 2013, 140 yen for each pound on June 24th 2016 when we knew the vote result, and you can still get 140 yen for each pound today. It’s true in between the pound went up and went down a bit against the yen. Japan without a Brexit vote has also had a currency falling against the Euro over the last year. Her exporters are probably pleased about that, and her companies located in the UK probably relieved they have no currency issues with the UK for their UK based activities because there has been currency stability between the yen and the pound over the last twelve months.

I mention this because the issue of which currency Japanese companies use when basing an investment in the EU has been a live one. In the 1980s I was Margaret Thatcher’s adviser on policy including economic and business policy. We did decide to offer a welcome to Japanese inward investors, especially in the car industry. We always made clear to them that the UK did not seek to develop and join a common currency with the rest of the EU, and would stay out of the more federalist parts of the EU project. They said they could accept that.

I became a Minister in the Trade and Industry department. I helped develop the relationships with the main Japanese inward investors. My pitch to them was that we would represent their wishes along with other business in the UK in an attempt to limit the damage the EU’s wish to tax and legislate might cause, as we sought to shape a more business and customer friendly single market. They welcomed this approach and saw the UK did need to disagree quite often with the EU plans. Global companies were often privately critical of EU proposals and wanted the UK to amend or head them off.

In the 1990s Japanese companies expressed concern when I and others made the case to stay out of the Euro. There was talk of some inward investors from around the world deciding to move to the continent if the UK failed to join. We took this argument on, stayed out of the Euro, and the overseas investors stayed here. The Japanese came to see that you cannot eliminate all currency fluctuations and having a pound which might trade closer to the yen than the Euro does could have its advantages.

The UK government did not make a simple offer of invest in the UK and you will be part of the whole EU club as many are now claiming, because that was not true. The UK was at the same time as attracting inward investors making it crystal clear it wanted its own currency, border arrangements and the rest. We always ruled out joining the Schengen movement area. Many overseas investors liked the UK package and understood it was very different to the continental one. They will be swayed in future, as in the past, by the blend of UK policies and the attractions of the UK market and skilled workforce.

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31 Comments

  1. Bob
    Posted August 30, 2017 at 3:26 pm | Permalink

    Your colleague the Member for Bournemouth West tweeted a very pertinent question to the EU’s lead negotiator about the claim that the UK has ongoing obligations.

    The tweet reads:

    “The UK pays her obligations. Why don’t you publish what you think they are based on law, i.e. Treaty obligations and directives?, legal facts help”

    why don’t you publish how you’re calculating UK bill based on law

    Sadly he subsequently deleted the tweets and said that his account had been hacked.
    Shame, I would have liked to seen the reply.

  2. ian wragg
    Posted August 30, 2017 at 3:38 pm | Permalink

    In 1965 I have my Navy Paybook and an exchange rate of 964 yen to the £.
    The Japanese government liked it this way as they were able to saturate Europe particularly Britain with their cars and motorcycles.
    Being right hand drive in Japan meant there was a ready market in Britain. Europe, particularly France introduced non tariff barriers to protect their industries, Britain saw it as an opportunity to shake up our poor quality manufacturers.
    50 years later, nothing has changed and we are still leading Europe away from disaster by leaving the EU.

    • Lifelogic
      Posted August 31, 2017 at 8:39 am | Permalink

      Also the government and unions had Corbynised the UK Car industry and most of it was falling to pieces. Peoples quite liked cars that were well build and reliable for a change.

  3. alan jutson
    Posted August 30, 2017 at 3:40 pm | Permalink

    Commercial enterprises will always go where they think they will get the best deal for themselves and their organisations in the longer term.

    Given the way Europe seems to be falling apart at the moment, I would be surprised if they did not see the UK as their best stable bet in the long term.

    Once approached it is up to us and our Government to close the deal.

  4. rose
    Posted August 30, 2017 at 4:08 pm | Permalink

    Thank you for once again setting the record straight. I notice the flurry of EU propaganda on this point is coming from British remainiacs, not Japanese, including the oft repeated: “Of course the Japanese are far too polite to say so, but… [and then follows the remainiac line on our alleged act of self-harm.]”

    We must make the point to these people that the Japanese would never dream of going into political union with mainland Asia, entailing free movement of people, hefty annual payments, and subjection to a supra national Asian court.

    I would guess, though they are far too polite to say so, that the Japanese are simply horrified at what Western Europe and the UK have done to themselves in deference to the no borders extremism and the bogus religion of human rights. That is something European they have never copied and probably never will, despite their ageing and dwindling population.

    • Mockbeggar
      Posted August 31, 2017 at 8:27 am | Permalink

      I saw the spokesman for Nomura Bank in London being interviewed on the 10.00 pm BBC News. As far as I could understand, he said that they would be hedging their bets a bit (like many other banks) by opening a small office in the EU. There was, of course, no suggestion that they would be moving lock, stock and barrel.

  5. margaret
    Posted August 30, 2017 at 4:43 pm | Permalink

    To my unskilled trading ears it sounds like the UK do all the work, get the contracts and the EU take the credit.

  6. acorn
    Posted August 30, 2017 at 4:53 pm | Permalink

    By the end of 1979 and the start of the Thatcher era, you could get 550 Japanese YEN to the Pound Sterling. Thatcher and Major together, managed to devalue the Pound to circa 140 YEN to the Pound by mid 1995.

    The Pound bubbled up to 250 to the YEN and finally imploded back to its fundamentals with the 2008 crash. It bubbled again in 2015 but, is now resuming its parabolic decline that started in 1980. My guess is the Pound will go asymptotic at circa 100 YEN and 1 Euro by 2027. Brexit may well accelerate that date considerably.

    Comparing Japan to the UK is apples and oranges. Japan is a net exporter, the UK a big net importer. Japan has a 250% “debt” to GDP because the Japanese people save the government’s money like there is no tomorrow; they don’t spend it like they are supposed to do.

    They seem to have forgotten that spending money is what makes the system work and get bigger. The Bank of Japan (BoJ), is buying government “debt” instruments twice as fast as the Japanese Treasury is spending new YEN into the Japanese economy. The BoJ has circa 60% of government savings certificates (Gilts) so far.

    Government “debt” to GDP is an irrelevant metric, it is just a measure of how much of the government’s FIAT “units of account” are being saved by the private sector. The big fear for the Japanese Treasury is that 126 million Japanese get pissed out of their brains; give up saving and start spending like there is no tomorrow. That will be some inflation that will need a large dose of fiscal policy to slow it down.

  7. Peter
    Posted August 30, 2017 at 5:08 pm | Permalink

    Verhofstadt is now saying transition terms will be exactly the same as for full membership.

    Time to walk away. We are wasting time and money. Our leaders need to man up and make the only sensible choice now.

    • Gary C
      Posted August 31, 2017 at 6:46 am | Permalink

      “Time to walk away. We are wasting time and money. Our leaders need to man up and make the only sensible choice now.”

      I agree, it does seem obvious the EU negotiators are playing for time in the hope we are worn down by our own treacherous remainer’s.

      Take action now and show them we no longer wish to take part in their petty game playing.

      Tell them to get sensible or . . . . . . . . . . . Jog on!

  8. Duncan
    Posted August 30, 2017 at 5:31 pm | Permalink

    My concern is that the current PM’s given Japanese car manufacturers certain assurances that the UK will remain in some shape or form part of the EU (EFTA) which may explain why they’ve decided to invest more capital here and not on the continent.

    I don’t trust Theresa May. Nor do I trust Hammond. They campaigned to stay in the EU. They are Europeans in the political sense and find democracy ever so slightly distasteful preferring major decisions to be taken by unelected, faceless bureaucrats

    I smell something fishy

  9. Bert Young
    Posted August 30, 2017 at 6:14 pm | Permalink

    I always found the Japanese to be strong supporters ; they often likened their ” island ” situation similar to ours . The business relationships that were created meant a great deal of two way traffic . Japan developed its ship building on the back of British advice and also benefited from the expertise input provided by us to its automotive industry . Japanese investment in this country grew substantially as a result .

    • paul cohen
      Posted August 31, 2017 at 6:40 am | Permalink

      The UK also restarted the German auto industry after 1945.

  10. agricola
    Posted August 30, 2017 at 6:33 pm | Permalink

    Once Japanese businesses make a decision they tend to stick with it, and as it proves correct others follow. They also respect seniority which in Japan is earned through merit. My experience in Japan is that they wait to see what the president chooses from the menu, they respect his decision and all choose chicken soup. All directors in the motor industry in my experience have all arrived via the shop floor. Irrespective of their speciality they know how the company functions, and can explain the engineering processes.

    This is why Honda, who were in a form of partnership cooperation with BL were appalled when British Aerospace’s board decided to sell BL without reference to them. Just one of the reasons that Hondo decided to go it alone here in the UK. We all know what happened to BL/Rover Group.

    Japanese involvement in UK manufacturing is established because it works both for the UK and Japan. The Japanese have also perfected a management style that involves everyone and works. They will still no doubt watch carefully the way Brexit develops, but they do not bail out at the first indication of problems. Under worst scenario WTO rules they can be compensated for tariffs paid to the EU with the product of the tariffs the EU has to pay the UK even if the transaction needs to be less obvious.

    • agricola
      Posted September 1, 2017 at 1:40 pm | Permalink

      Chop Chop.

  11. yulwaymartyn
    Posted August 30, 2017 at 9:37 pm | Permalink

    Unbelievable figures coming out of the eurozone today. Apparently confidence levels are at a 16 year high. Growth figures up in France, Germany, Spain and Italy. I mean Italy!

    • Ian Wragg
      Posted August 31, 2017 at 11:42 am | Permalink

      Your point is………..

      • yulwaymartyn
        Posted August 31, 2017 at 4:35 pm | Permalink

        Exactly. My point is why are confidence levels so high?.

  12. ChrisS
    Posted August 30, 2017 at 9:54 pm | Permalink

    Is the Conservative Party really going to take the risk of allowing Mrs May to lead it into another General Election ?

    Given her track record, I can’t believe that even her most ardent supporters will be keen for her to stay on until 2022.

    If she had said nothing on the subject, the rivals for her job might have settled down and bided their time until after the Brexit negotiations are settled. After all, they could reasonably have expected her to step down in 2020-21 and allow maybe three months for a leadership contest to take place and give her successor 12 months to settle into the job before the election.

    Now Boris and Co will spend the next three years looking to undermine her to ensure she can’t continue past 2020. This is an extremely dangerous situation and very divisive for the Party, just at the time the Brexit negotiations are getting very difficult.

    The steadiest of nerves will be needed following the accusations from both sides of the negotiation table on Wednesday. Although it will come as no surprise to anyone regularly posting here, the likelihood of us leaving the EU with no deal has just become very much more likely.

    One question : has this probability already been factored into the exchange rate ? If not we could see the pound plummet much further in the next month or so. Just as I’m off to France for most of the next six weeks !

    • a-tracy
      Posted August 31, 2017 at 9:23 am | Permalink

      John Redwood seemed clear on the radio this morning, Theresa May will lead into the next election, it’s a none story. Boris and Co have seen what happens to their careers and trajectory if they go against the higher ups.

      problem is if she screws it up the people won’t forget

  13. John
    Posted August 30, 2017 at 10:24 pm | Permalink

    I like these insights, I should really read the books, all else is just white noise.

  14. Ed Mahony
    Posted August 31, 2017 at 1:31 am | Permalink

    Sorry, don’t want to bang on but just this point:

    Brexiters appear incapable of creating a short-term, medium-term and long-term strategy like an entrepreneur would have to produce in a business plan if trying to raise money for a business.

    I mean leading Brexiters in general (not just negotiators who want to ‘keep things’ to themselves). You’ve got to have a plan. And that includes how to deal with the numerous challenges to your goal (not just the benefit of leaving the EU).

    So often, i just see vague desires / arguments based on wishful thinking. Wouldn’t it be nice. And subjective feelings about the EU.

    If people want to leave the EU, fine. But you’ve got to have a plan. A strategy. A proper, detailed strategy. And businesses are worried because there appears to be an absence of a strategy. And if you were an investor, would you really invest lots of money in a business, without a proper business plan? Again, why should people invest their loyalty in a plan to the leave the EU when no real, detailed plan has been offered up. Just vague plans here and there, with lots of wishful thinking and insults if you don’t agree.

    So again, here’s someone who really wants to understand the Brexit position, and how it will be possible (not why it would be nice) to implement Brexit (Hard, Medium of Soft) for the long-term economic and political success of our country.

    Can some please help?

    Reply Try reading the White Paper and Lancaster House speech which have a clear plan – and then remember we have a Plan B, leaving with no deal which is why we will be legislating to run our own borders and customs next year

    • Ed Mahony
      Posted August 31, 2017 at 10:59 am | Permalink

      Lancaster House speech is PR. There is nothing on risk assessment, and a detailed plan how to deal with weaknesses in / challenges to leaving Brexit.

      Risk assessment / business plan is a basic in business. I’ve found nothing similar by any leading Brexit organisation.

      It’s not surprising that so many people in business are uncomfortable by Brexit, as it’s so dependent on vague plans, PR, and wishful-thinking.

      • Ed Mahony
        Posted August 31, 2017 at 11:12 am | Permalink

        ‘Lancaster House speech is PR’

        – sorry, i meant more PR than business plan in the sense i can’t find a section that focuses on risk assessment in any detail.

        Sure, focus on the positives. But focusing on how you deal with the negatives is just as important. And it can’t be vague. It has to be really detailed. As detailed as possible so that as many negatives are accounted for and how we should respond to them.

        So there isn’t really a proper business plan. But then not surprising when the referendum wasn’t introduced for economic or national political reasons but merely to resolve Conservative Party politics. There was no clear outline what people were really voting for. And the referendum was held at a time, when our country can’t afford a re-jigging of its economy right now when we’ve just come out of one of the worst recessions in years. With all kinds of political challenges, including the socialists breathing down our necks.

        Surely, our primary goal at the moment is to pay of our national debt, build up our economy, and keep the socialists at bay. And then and only then talking about leaving the EU, whilst putting together a proper, detailed, comprehensive risk-factor plan, like you would in business, or some complicated scientific enterprise – like a *moon landing.

        *Reference to David Davis’ comment about how complicated aspects of Brexit are.

        Logic. Planning. Strategy. Where are they?

  15. Lifelogic
    Posted August 31, 2017 at 5:30 am | Permalink

    They will indeed be swayed in future, as in the past, by the blend of UK policies and the attractions of the UK market and skilled workforce.

    But today we had the terrifying words of May “I am not a quitter”, let us hope she, at the very least, quits her daft socialist agenda, her expensive energy lunacy, the interventionist approach, her over taxation, her endless waste, HS2, Hinkley, her let’s build on EU workers rights, her gender pay gap drivel and her general tax borrow and piss down the drain approach.

    At the very least Hammond must go. He is just as economically illiterate as Osborne was. The current fiscal system is absurdly complex and absurdly damaging.

    If we get this the investors and investment will follow as day follows night. Election victories will follow too. Lefties Heath, Major, May and Cameron have been dire at elections even against zero real opposition. Thatcher won three, four really with Major as her chosen man (until the public sussed out what a misguided EU/ERM pushing dope he was and he buried the party until now).

    May seems to want to bury the party yet again.

  16. Sakara Gold
    Posted August 31, 2017 at 6:03 am | Permalink

    What pressure is Mrs May putting on the Japanese government concerning the massive amounts of nuclear contamination that is being released into the pacific from the Fukushima disaster? Recent reports suggest that plumes of radioactivity have now been detected in California and Alaska. Are the Japanese being allowed to pollute the world following their inability to control releases of radioactivity? The world is already suffering an epidemic of cancer.

    • sm
      Posted August 31, 2017 at 7:12 am | Permalink

      Although cancer occurs in all age groups, it is primarily (I understand) a disease of the elderly. Since vastly more people survive into their 60s, 70s and 80s now than ever before, it follows that cancer rates are shooting up.

      It is also noticeable in my OAP generation that in many cases, an initial bout of cancer is ‘cured’, and then either months or years later, another attack occurs) – this is presumably counted as two cases, rather than one.

  17. Posted August 31, 2017 at 6:48 am | Permalink

    What UK market ?

    If the gold standard, fixed exchange rate brigade keep trying to cut the deficit ( everybody’s savings) and run budget surpluses ( pushing more people into debt) there won’t be a UK market.

  18. ferdinand
    Posted August 31, 2017 at 6:51 am | Permalink

    Thanks for that clear explanation.

  19. Original Richard
    Posted August 31, 2017 at 7:39 am | Permalink

    The Japanese, as everyone else, will want to have a presence in all markets so when it comes to the UK and the EU they will want to be in both. It is not a question of ‘either or’.

    Hence Nissan’s decision to expand their UK factory and because of the fall of the £, together with the possible prospect of tariffs between the UK and the EU, Nissan have also decided to substantially increase the percentage of components produced in the UK.

    This shows an advantage for UK manufacturing of NOT being in the EU SM when we are huge importers of cars.

  20. Epikouros
    Posted August 31, 2017 at 8:05 am | Permalink

    For whatever the reason for the fall in sterling it is at least having one beneficial effect it is helping our exports and hence our economy. Doomsayers like remainers may glorify in capitalising on the fall of the pound for which they have been partly responsible with their dire predictions on Brexit but it has backfired on them. The continued economic growth after the Brexit vote is partly down to the lower currency.

    The same people would have had us join the euro which we have seen because it leaves less room for a country to revalue it can cause a few countries like Germany to benefit at the expense of many countries like Greece, Ireland, Italy and Spain. Aligning their political and economic systems is not going to solve that problem as the fundamental business models are and always will be so different.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.

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