US-China conflict affects Japanese firms’ confidence in Malaysia

The pessimism is commensurate with the stagnant semiconductor market conditions in the country


JAPANESE companies were seen to be less optimistic about business and operating conditions in Malaysia during the second half of 2019 (2H19), following uncertainties caused by the US-China trade conflict.

The pessimism is also commensurate with the stagnant semiconductor market conditions in the country.

The despondency was very much reflected in the Japanese Chamber of Trade and Industry Malaysia’s (JACTIM) Diffusion Index which fell to a negative 29.9 points — the lowest level since 2008.

JACTIM VP Daiji Kojima (picture) said manufacturers, particularly in the electrical and electronics (E&E) and mechanical and engineering (M&E) sectors, have been impacted the most by the volatility of the trade negotiations between the two economic powerhouses.

“The business sentiment of the Japanese companies has declined to its lowest since the bankruptcy of Lehman Brothers in 2008.

“Although some of the Japanese E&E and M&E companies have been in Malaysia for more than 30 years, they have been impacted the most from the US-China trade friction,” he said in a media briefing in Kuala Lumpur yesterday.

The business survey, which measures the confidence level of 296 JACTIM member companies in Malaysia, also reveals that Japanese manufacturing companies in the country are being pressured by the rising labour cost.

However, Kojima said Japanese companies have indicated that they are willing to comply with the Malaysian government’s initiative to increase the minimum wage.

“Japanese companies are ready to accept the increased labour cost as regulated by the Malaysian government. However, the cost has been increased by about 10% in the past two years, which is faster than the companies anticipated.

“The companies are trying to implement cost reduction strategies to balance out the rising labour cost and at the same time, increase their efficiency,” he said.

In the survey, the Japanese companies also stated that foreign-exchange (forex) loss was the main hurdle of maintaining a business operation in Malaysia.

Kojima said export-oriented manufacturers, including Japanese firms, have been flustered in complying with Malaysia’s government policy on enhancing the liquidity of the forex market, including requiring exporters to convert at least 75% of export proceeds received into ringgit.

“Japanese companies in Malaysia are widely exposed to the global market through export and import activities.

“Malaysia’s policy on converting most of the export proceeds to ringgit introduced three years ago is an inconvenience for the companies,” he said.

As for the survey’s employee index, Japan External Trade Organisation Malaysia MD Mai Onozawa said the JACTIM members indicated that there was a surplus in their staff level, particularly in the E&E industry.

“The E&E and steel industries indicated that there was a surplus in their staff level, it was the first time “surplus” leads the employee index.

“However, the non-manufacturing sectors indicated that they were experiencing an insufficient number of employees,” she said.