Toyota send Britain EMU wakeup call

Toyota send Britain EMU wakeup call

By Brian Williams

TOKYO (Reuter): Toyota president Hiroshi Okuda sent a belated wake-up call to Britain with his forthright comments about the importance to Japanese investors of a single European currency, financial analysts said on Thursday.

While the message was received by some in Britain as an unwelcome political signal, or even interference in its domestic affairs, it shows that uncertainty over Britain's role in Europe is a nagging concern for Japanese firms deciding on where to invest and base their plants, they said.

In comments to reporters on Wednesday, Okuda stirred up a political row by seeming to rule out building new factories in Britain if it stays out of a European single currency.

Okuda said Toyota could rather put new investment in continental Europe if Britain did not sign up for monetary union. The analysts said there was a reservoir of goodwill for Britain as a base for operations due to the warm welcome it had given in the past to Japanese firms seeking a toehold in Europe.

Finance Ministry figures show how popular Britain has been as a European base for many Japanese firms.

Japan's direct investment in Britain totaled 333.2 billion yen ($2.73 billion) in the year to March 1996, which accounted for 40 percent of its total direct investment in Europe.

"Japan has about 40 percent of its direct investment in Europe in Britain, so businesses here are concerned about whether Britain will be a member of the European monetary union (EMU)," said Larry Duke, vice president at Citibank Japan.

"If it looks likely that 1999 is going to be the date for stage one of EMU, then it's incumbent upon Britain to become an initial member of EMU because that would reduce the uncertainty for Japanese investors," Duke told Reuters.

"Awareness (of EMU) has gone up a lot here and the Japanese will continue to be more and more aware of it," he added.

An analyst at a Japanese research institute said it would be no surprise if Japanese companies decided to scale down their investment in Britain if London stayed out of EMU.

"If Japanese companies were able to trade freely without any tariff in continental Europe in the aftermath of EMU, it would be better for them to deal with this large market than with Britain if it is excluded from the single-currency trading zone," the analyst, who asked not to be identified, said.

"I think Toyota is giving a warning to Britain that it should make more effort to ensure equal investment conditions even if it doesn't join EMU," said Kazunori Tokuda, a car industry analyst at Wako Research Institute.

Based on cost alone, Britain would still be Toyota's best bet but the firm might consider more output in continental Europe to get closer to consumers, Tokuda added.

Rival carmaker Nissan Motor Co Ltd said Britain remained an important international base and that it had no plans to review its investment strategy.

"Britain is an important car supply base on the global level. So we have absolutely no intention now to change that status," a Nissan spokeswoman told Reuters.

Honda Motor Co Ltd also said it had no plan to change its current output in Britain regardless of the EMU.

In a further statement on Thursday, apparently designed to defuse the row in Britain, Toyota's Okuda said investment in Britain remained an option but he also stressed the importance of a unified currency for firms operating in Europe.

Japanese electronics giant Sony shrugged off the issue.

Sony Corp president Nobuyuki Idei told Reuters in an interview that there would be virtually no impact on Sony's operations even if Britain did not join the EMU, because it has diversified its production bases in other European countries.