Sony, Suntory build U.S. stockpiles as Japan faces Trump tariff threat

By Tim Kelly, Kentaro Okasaka and Rocky Swift

TOKYO (Reuters) -Japanese electronics giant Sony and drinks maker Suntory are stockpiling inventory in the United States while their peers shift production or supply chains in efforts to fend off an evolving threat of U.S. tariffs on the export-reliant economy.

In his latest trade salvo this week, President Donald Trump hinted that he might target Tokyo next, after throwing up new tariff barriers against Mexico and China, low-cost production hubs favoured by key Japanese industries, such as automakers.

The scale of the tariff threat for Japan Inc has been further highlighted by Honda's decision to produce a new model of one of its top-selling cars in the United States, instead of Mexico, Reuters exclusively reported on Monday.

Japan Display, a major supplier of LCD screens to the auto industry, said it was also considering production of some items in the United States, partly to avoid tariffs, a move a recent survey showed is being considered by hundreds of peers.

Major Japanese suppliers to iPhone maker Apple - Alps Alpine and Murata Manufacturing - are among other firms looking to insulate supply chains from escalating trade tension.

"Corporates are now more aware that Japan could also be a target," said Norihiro Yamaguchi, a senior economist at Oxford Economics.

Yamaguchi pointed to Trump's warning that the United States may use tariffs to offset any competitive disadvantage to its manufacturers if Japan and China do not stop reducing the value of their currencies.

The protectionist U.S. president is set to levy reciprocal tariffs globally and industry-specific duties that could further hurt Japan, the world's fourth largest economy, a top exporter to the United States and its biggest source of foreign investment. 

Japan has denied devaluing its currency and pledged U.S. investments to assuage Trump's concerns on trade. Its trade minister is set to visit Washington as soon as next week to seek tariff exemptions, domestic media have said. 

Japanese companies are particularly exposed to trade duties as many have concentrated for decades on overseas sales, particularly to the United States, to counter weak domestic demand and a shrinking population, Yamaguchi said.

Almost nine in 10 Japanese companies expect Trump's policies to hurt business, a Reuters survey showed last month.

Of these, 72% saw his trade strategy, including more tariffs, as the most detrimental factor, while 26% chose friction between the United States and China, Japan's other major trading partner.

Even before accounting for tariffs that may target Tokyo, think tank the Daiwa Institute of Research projects that a trade war between the United States and other countries including China could shave 1.4% from Japan's $4.2-trillion economy over two to three years. 

Stefan Angrick, a senior economist with Moody's Analytics, said it was challenging to quantify the economic damage from tariffs as the business uncertainty they created could be more devastating than any direct impact.

SHIFTING STRATEGIES

More than 300 Japanese companies not yet operating in the United States have indicated they want to set up there, a survey by Japan's export-promotion agency JETRO showed this month, up about 50% from the previous year.

"Concerns about future U.S. tariff policies were frequently mentioned in our interviews," said Hirotoshi Ito, an official involved in the survey, which did not identify the companies.

Other firms had already begun stockpiling products.

Sony Group President Hiroki Totoki told a press conference last month that the Playstation maker had been preparing for tariffs by building up inventory from its gaming and electronics divisions in the United States.

A company spokesperson declined to provide details.

Drinks giant Suntory said it had shipped tequila from its Mexican brands to the United States in anticipation of tariffs of 25% imposed on Mexico and Canada on Tuesday.

A spokesperson for the firm said it was also considering shifting sales of Scotch whiskies to Europe from the United States, while focusing on selling more American whiskey in the U.S. to mitigate "more tariff war and tit-for-tat actions".

Other tariff response strategies have aimed at moving supply chains to try and avoid trade spats.

Electronics component maker Alps Alpine said it was advancing a plan to return production to Japan that could help protect its business from tariffs imposed on third-party countries. 

Alps is a leading maker of smartphone camera actuators, tiny motors that essentially run a camera's focusing system. It supplies Apple from factories in China, Japan and Malaysia, the iPhone maker's latest supplier list shows.

The firm said it now makes some items in Mexico for U.S. export that stand to be affected by tariffs. 

Another Apple supplier, Murata Manufacturing, said it was pushing ahead with efforts to "double-track" its supply chain.

That involves making items in China for Chinese customers only, and shipping products to the rest of the world from its plants in Japan and Thailand.

Specialist talent is in high demand to help companies navigate the minefield of evolving global tariffs.

Since Trump's election in November, firms based in Japan have stepped up demand for tax managers and audit professionals, partly to chalk out tariff strategies and compliance, said Grant Torrens, Japan head for recruitment firm Hays.

But more broadly among export-focused clients, the uncertainty has also fuelled a trend of lengthier decision-making about new hires.

"Organisations are still wanting to pipeline for future hiring, but are cautious to bring in that talent now in case a larger decision is needed on relocating entire production facilities offshore to the United States," he added.

(Reporting by Tim Kelly, Kentaro Okasaka, Rocky Swift, Ritsuko Shimizu, John Geddie, Hirata Noriyuki and Sam Nussey; Writing by John Geddie; Editing by Clarence Fernandez)