Japan is reassessing the strategic importance of post Brexit Britain
The strategic importance of Post Brexit Britain is being reassessed by Japan, say leading audit, tax and business advisory firm, Blick Rothenberg.
Yusuke Takanishi, a partner at the firm, said: “For Japanese companies, the UK continues to serve as a financial and investment hub, as well as a gateway for broader European operations. Japan remains one of the largest sources of foreign direct investment into the UK, accounting for around 9% of total inward investment, second only to the United States. This underscores the UK’s role not just as a market, but as a strategic base within a wider European footprint.”
He added: “What is particularly noteworthy in the Bank of Japan’s (BOJ) latest report on Developments in Real Exports and Real Imports is that while exports to the EU remain broadly stable, they reflect a mature trade relationship, with EU–Japan trade in goods and services totalling over €190 billion in 2024, accounting for roughly 10% of Japan’s total trade.”
Yusuke said: “By contrast, the UK has begun offering a different kind of value—namely regulatory flexibility and greater agility in policymaking. In other words, the UK is becoming less significant as a purely quantitative export destination and more important as a strategic and structural base of operations.”
He added: “Japanese exports in late 2025 began to rebound after a period of contraction when compared to the previous year. In September 2025 they climbed by 4.2%, in October 2025 they were up by 3.6%, November 2025 up by 6.1% and December 2025 up by 5.1%. In January 2026, exports climbed again by 16.8% compared to January 2025. This recovery was likely driven by the reduction of US tariffs to 15% in late July.”
Yusuke said: “But the latest export data from the BOJ for February, March and April 2026 paints a more subdued picture. Real exports—adjusted for price changes to reflect actual shipment volumes—have been hovering around the 115–120 range, meaning export volumes are roughly 15–20% higher than their 2020 baseline, but have stopped growing further. This is not a collapse, but rather a ‘plateau phase’ following the peak of the post-recovery rebound.”
He added: “Japan’s overall trade situation can no longer be explained simply by the ups and downs of the business cycle. It is now entering a phase that is considerably more complex—and far harder to interpret—than before. Although the data from the BOJ implies calm or moderate decline the underlying drivers are changing and becoming harder to read.”
Yusuke said: “The recent slowdown could be interpreted as being directly caused by escalating tensions surrounding Iran or by U.S. tariff policies. In reality, however, these factors are better understood as contributing influences rather than primary drivers. The environment surrounding the Japanese economy is undergoing a far more structural transformation. The UK faces a similar situation on a broader scale, where the impact of US tariffs and the Iran conflict have masked deep structural financial issues driving an overall economic slowdown.”
He added: “The most significant underlying factor is the maturation of the global manufacturing cycle itself. The post-pandemic recovery phase has already entered its later stages, and demand growth is naturally slowing. The current situation—where both exports and imports are levelling off simultaneously—should therefore be seen as a classic ‘late-cycle economic signal.’ A late cycle economy is the final phase of economic expansion before a recession or downturn.”
Yusuke said: “Against this backdrop, U.S. trade policy has indeed become a meaningful risk factor. In particular, in the automotive and parts sectors, tariffs and localization pressures are acting to restrain export growth. Crucially, however, the U.S. economy itself remains relatively resilient. The current situation is not one in which exports are being ‘halted,’ but rather one in which their pace of growth is slowing.”
He added: “Meanwhile, the Iran conflict is affecting the Japanese economy less through exports and more through imports. Like in the UK, rising oil prices and transportation costs represent classic cost-push pressures for Japan, gradually weighing on corporate earnings. For Japan the defining feature of the current risk environment is not falling demand, but rising costs.”