Merkel, Japan's Abe Seek to Avoid Chaos From No-Deal Brexit

(Bloomberg) -- German Chancellor Angela Merkel and Japanese Prime Minister Shinzo Abe said they want to head off a no-deal Brexit that could rattle their economies, as both braced against the U.K.’s increasingly chaotic course toward an exit from the EU.

Abe and Merkel, both 64, are two of the most outspoken defenders of the international order being shaken by Brexit and the U.S.-China trade war, as well as President Donald Trump’s questioning of decades-old alliances. Their summit in Tokyo Monday took place days after a Japan-European Union trade agreement came into effect, removing almost all tariffs.

“I conveyed to Chancellor Merkel our strong expectations that a no-deal Brexit will be avoided,” Abe told reporters after the talks. “Japan wants the effect on Japanese companies, and on the economy, to be kept to a minimum.” He told Merkel that Japan and Germany must play a greater role on the global stage as the U.K. exits the EU, according to the Foreign Ministry website.

Merkel said she would do what she could to avoid a disruptive Brexit. She arrived in Japan hours after Nissan Motor Co. announced it had scrapped a plan to build a sport-utility vehicle line in the U.K., amid uncertainty over the country’s future ties with the EU.

“We want to do everything to ensure that a no-deal doesn’t happen, because that would only heighten insecurity,” Merkel said. “You have to be creative and listen to each other, such discussions can and must take place.”

Defense Cooperation

The German leader brought with her a delegation of top executives from companies including Siemens AG and Bayer AG and is set to address a business gathering in Tokyo Tuesday, as well as meet Emperor Akihito and his son, Crown Prince Naruhito. Merkel will visit Japanese technology company NEC Corp. before leaving Tuesday evening.

She and Abe also announced at the news briefing a basic agreement on information security that would allow more defense cooperation.

Merkel called on EU leaders last month to shape the process of the U.K.’s separation from Europe in a “responsible way.” Initially an outspoken opponent of Brexit, Abe has more recently called for it to be done in a way that minimizes the effect on Japanese businesses in the U.K.

Some of Japan’s biggest brands including Nissan, tech conglomerate SoftBank Group Corp. and fashion brand Uniqlo use the U.K. as their foothold in Europe and are worried they could get caught in the crossfire.

In a speech at the World Economic Forum at Davos, Abe said trust in the international trade system must be rebuilt, and urged reform of the World Trade Organization to keep it in line with global changes.

Japan and Germany -- the world’s third and fourth largest economies -- are both awaiting a Feb. 17 deadline for the U.S. Commerce Department to publish a report on the national security implications of auto imports that could justify tariffs on foreign cars.

Trump used the same legal provision to justify slapping steel and aluminum tariffs on countries including Japan last year. He could leverage the threat of car tariffs to pry open Japanese markets in upcoming bilateral trade talks.

As well as sharing concerns about trade, Japan and Germany have both come under fire from Trump for not spending enough on defense. Japan spends about one percent of gross domestic product on defense, while Germany spends about 1.2 percent, according to World Bank data.

©2019 Bloomberg L.P.