In the final days of his presidency, Joe Biden has taken bold steps to solidify his legacy, implementing a series of controversial decisions that are sure to have far-reaching implications. One such move is the ban on offshore drilling in key coastal areas of the US, covering nearly 0.98 million square miles. This ban includes the entire Atlantic coast and eastern Gulf of Mexico, effectively shutting down any potential drilling operations in these regions.
The decision to ban offshore drilling comes as a direct response to Donald Trump’s pro-drilling stance, and serves as a stark contrast to his administration’s environmental policies. While the incoming Trump administration may attempt to overturn this decision, it is unlikely to have an immediate impact on the oil and gas industry, as there are no active drilling prospects in the banned zones. This move follows Biden’s earlier decision to cancel the permit for the Keystone XL Pipeline, further solidifying his commitment to environmental protection.
In another controversial move, the Biden administration has blocked the proposed $14.9 billion takeover of US Steel by Japanese rival Nippon Steel. The decision, which was widely anticipated, has raised concerns about national security and regulatory oversight. Japanese Prime Minister Shigeru Ishiba has called for further clarity on the decision, citing the significant investment Nippon Steel had planned for its US counterpart. The move has sparked fears of a potential cooling effect on foreign investment in the US.
The timing of this decision is notable, coming shortly after SoftBank announced a $100 billion investment in the US, a move praised by President-elect Trump. However, Trump had previously expressed opposition to the US Steel-Nippon Steel merger, vowing to revitalize the US steel industry through tax incentives and tariffs. These recent developments have reignited concerns about economic nationalism and its impact on global trade relations.
Despite these challenges, Japan has been experiencing economic growth and market dynamism in recent years. The Nikkei 225 index reached record highs in 2021, driven by a tech boom, weakening yen, and corporate governance reforms. The gradual decrease in cross-shareholdings by Japanese companies has led to increased shareholder activism and greater pressure on companies to improve returns and capital allocations. This shift has also paved the way for increased M&A activity in the Japanese market.
Inflationary pressures have helped stimulate Japan’s economy, with wage growth at a 30-year high and rising consumer spending. However, concerns remain about the impact of rising input costs on export competitiveness. The prospect of aggressive US trade policies could pose challenges for Japanese companies, but the continued strong trade relationship between the US and Japan suggests that opportunities for investment remain attractive.
Overall, Japan’s economic outlook appears positive, despite potential challenges on the horizon. The country’s ongoing reforms and market dynamics make it an appealing prospect for investors, with the Nikkei 225’s average forward price/earnings ratio of 20 times presenting an enticing entry point for UK investors. As Japan navigates the evolving global economic landscape, it remains poised for continued growth and investment opportunities.