Russia's military invasion of Ukraine has begun.
We have summarized the impacts and movements on the economy.
57 Japanese companies in Ukraine
In response to this situation, the impact on the business of Japanese companies expanding into Ukraine and Russia is inevitable, and each company is paying close attention to the situation.
According to Teikoku Databank, a private credit bureau, there are 57 Japanese companies in Ukraine as of January.
By industry, the manufacturing industry accounts for half of the 28 companies, and there are bases responsible for sales and manufacturing of automobiles, construction machinery, agricultural materials, etc. Of these, factories for parts called "wire harnesses" have entered the market. doing.
There are also 16 wholesalers such as major trading companies.
According to JETRO = Japan External Trade Organization, the number of Japanese companies entering the market is not large compared to other countries in Europe, but recently, the growth of the IT industry has been accelerating, so we have decided to establish a software development base. Some Japanese companies set up.
Looking at the trade between Japan and Ukraine, tobacco accounts for 50% of the import value, and JT = Japan Tobacco has a local factory.
In response to the tightening situation in Ukraine, major trading companies such as "Itochu", "Sumitomo" and "Marubeni" have already evacuated local expatriates to Japan and neighboring countries.
As for electrical equipment manufacturers, Hitachi has a development base for the American IT company "Global Logic" that it acquired last year in Ukraine, but there are no Japanese employees.
However, about 7,200 engineers are working at the five bases, and they have put together a plan to evacuate employees and their families at home and abroad in case of an invasion of Russia.
Panasonic has a sales company in Ukraine and had one Japanese expatriate, but it has already taken steps to return to Japan.
In addition, Canon and Konica Minolta also have local sales companies, but none of them have Japanese employees.
Fujikura, which manufactures wire harnesses locally, is also considering temporarily consolidating its production system to factories in neighboring countries so that the supply network of parts = supply chain will not be affected.
JT says that there are no Japanese in the local factory and will consider the operation of the factory based on the situation.
On the other hand, according to the Ministry of Foreign Affairs' survey on the number of Japanese companies expanding overseas, 421 Japanese companies have expanded into Russia as of October.
Automakers such as Toyota and Nissan have local production bases, and Mitsui and Mitsubishi Corporation are participating in the development of natural gas in the Far East Sakhalin.
According to JETRO, in terms of trade relations, the value of exports from Japan to Russia is $ 5.87 billion, half of which is for transportation equipment such as passenger cars, buses and trucks.
On the other hand, the value of imports from Russia to Japan is 10,706 million dollars, and energy-related products such as LNG = liquefied natural gas, coal and crude oil account for about 60%, and fish and shellfish also account for about 10%. increase.
If Europe, the United States and Japan impose economic sanctions following Russia's invasion of Ukraine, it will inevitably affect Japanese companies that develop a wide range of businesses, and each company is paying close attention to the situation.
Significant impact on energy and financial markets
The situation in Ukraine is also having a major impact on energy and financial markets.
Russia is the world's second largest supplier of natural gas, and in Europe, especially Germany, it relies on imports from Russia for approximately 34% of its natural gas.
If the supply of natural gas from Russia is stagnant due to economic sanctions, the European economy is expected to be significantly affected and the price of natural gas is expected to rise.
In connection with this, demand for crude oil as a substitute for natural gas will increase, and there is a sense of caution that supply from oil-producing Russia will be stagnant, so there is concern that prices that have already remained high will rise further. Will be.
As a result, in response to inflation, prices may rise further in Europe and the United States, where monetary tightening is rushing.
Since the movement to tighten monetary policy in the United States has often shaken the market, there is growing concern among market participants that the financial market may be further confused, such as a sharp drop in stock prices.
In addition, while there is a view that the yen, which is considered to be a relatively safe asset, will be bought in the foreign exchange market, there is also a view that the dollar, which is said to be strong in an emergency, will be bought. The outlook is becoming more uncertain.
Concerns about further rise in energy prices in Japan
Concerned by Russia's invasion of Ukraine is the further rise in energy prices in Japan.
Russia is an energy superpower that boasts one of the world's largest production volumes along with crude oil and natural gas.
Crude oil is the third largest producer in the world, accounting for 12.1%, after the United States (18.6%) and Saudi Arabia (12.5%).
Natural gas has the second largest production volume in the world, with a 16.6% share after the United States (23.7%).
Natural gas is exported to countries around the world through pipelines and LNG = liquefied natural gas.
Especially from Europe, about 31% of oil and about 33% of natural gas depend on imports from Russia.
If a military conflict occurs in such a situation, there is a growing concern that the supply of oil and natural gas may be disrupted, and it is highly likely that there will be upward pressure on the prices of crude oil and natural gas.
Due to the tightening situation in Ukraine, the futures price of WTI, which is an international indicator, is on the rise in the New York crude oil market, and on the 24th, it temporarily exceeded $ 98 a barrel and approached $ 100. I did.
The impact of rising crude oil futures prices will first affect domestic gasoline prices.
The retail price of regular gasoline as of the 21st of this month is 172 yen per liter on average nationwide.
The price has risen for 7 consecutive weeks and has been at the highest level for the first time in about 13 years.
In addition, the over-the-counter price of kerosene is also rising.
If the price of crude oil rises, the price of gasoline and kerosene may rise further.
Furthermore, there are concerns about the impact on electricity and gas prices.
Major electric power companies import large amounts of natural gas as fuel for power plants.
Rising crude oil prices and natural gas prices are directly linked to rising electricity prices.
Already, the electricity prices for March of the 10 major electric power companies are at the highest level in the past five years when they can be compared.
LNG = The main factor is that the import price of fuels such as liquefied natural gas has risen sharply.
Further fear of the market is the narrowing of natural gas from Russia to Europe.
European countries are supplied with natural gas by pipeline from Russia.
It has been pointed out that the United States and the EU = European Union have imposed economic sanctions on Russia, and Russia may reduce the supply of natural gas through pipelines as a countermeasure in the future.
If Russia were to curtail its supply of natural gas to Europe, it could hurt the European economy and lead to higher global energy prices.
In Japan, there are concerns that not only rising gasoline prices and electricity prices, but also global inflation will have a major negative impact on the economy as a whole.
Deep connection between Russia and Europe in natural gas trading
Russia and Europe have a deep connection through the natural gas trade.
From Europe, about 34% of all natural gas demand is imported from Russia.
Of these, 31% are from pipelines and 3.2% are from LNG = liquefied natural gas.
The natural gas pipeline supplied from Russia to Europe is broadly divided into three routes.
A pipeline called "Nord Stream" that connects Russia to Germany through the bottom of the Baltic Sea, "Yamar Europe" that connects to Germany via Belarus and Poland, and Romania, Slovakia, Czech Republic, etc. via Ukraine. There are three pipelines that branch into each country in Europe.
According to JOGMEC "Japan Oil, Gas and Metals and Mineral Resources Organization", in 2019, the amount exported from Russia to Europe through pipe runs averaged 526 million cubic meters per day, of which the amount via Ukraine Averaged 254 million cubic meters per day, the highest, accounting for about half of the total.
However, in January, it was 82 million cubic meters, a decrease of more than 67% from the 2019 average.
It has remained at a low level since then, with an average of 153 million cubic meters per day last year, a decrease of about 40% compared to 2019, and the portion via Ukraine has decreased significantly in the whole.
Hiroshi Shirakawa, a researcher at JOGMEC who is familiar with the situation of natural gas overseas, said, "Since using a pipeline that goes through Ukraine will generate income in Ukraine, there is no speculation that Russia wants to stop using this pipeline in the future. Is it? "
Under these circumstances, Russia is rushing to operate "Nord Stream 2".
With a total length of 1,200 km pipeline that runs directly to Germany through the bottom of the Baltic Sea, the total project cost for construction is 9.5 billion euros = about 1.2 trillion yen.
Once this goes live, Russia will be able to increase its route to export natural gas directly to Europe without going through Ukraine.
Meanwhile, Germany announced on the 22nd of this month that Russia's President Vladimir Putin would suspend the approval process for Nord Stream 2 following the approval of the independence of pro-Russian-controlled areas in eastern Ukraine, effectively planning. It's frozen.
Russia also produces LNG = liquefied natural gas in a gas field on the Yamal Peninsula in the Arctic.
It is exported to European countries by LNG carrier through the Arctic Ocean.
Concerned about the impact on grain prices
Due to the tightening situation in Ukraine, there are concerns about the impact on global grain prices.
Ukraine is a plain country north of the Black Sea, and is a large agricultural country with a thriving grain production due to its fertile soil.
We export wheat and corn.
FAO = According to the Food and Agriculture Organization of the United Nations, the export volume of adult rapeseed is the second largest in the world, corn is the fourth largest in the world, and wheat is the fifth largest in the world.
Of these, wheat is exported to Egypt, Indonesia and Turkey.
Global grain prices are rising due to a shortage of containers due to the corona wreck and high temperatures in the United States and Canada, and Japan also raised the selling price of imported wheat by the government from October last year, thereby flour and bread. , Udon has led to price increases for many foods.
Experts point out that in Ukraine, one of the largest grain exporters, the situation could become tense and affect agricultural production, which could lead to higher global grain prices.
Akio Shibata, a representative of the Institute for Resources and Food Problems, who is familiar with the world's food problems, said, "Amid rising grain prices, Ukraine is thought to have increased production and used as a coolant for rising prices. Due to the invasion of Russia. If the supply of grain in Ukraine becomes unavailable, not only will it have a serious impact on the countries to which it is exported, but it will also have the effect of raising global grain prices and, as a result, raising wheat prices in Japan as well. " I'm talking.
Ukraine is a center of IT industry
Ukraine has many IT-related human resources, and in recent years it has become a center of IT industry, with software development bases for Japanese companies.
According to the summary of JETRO = Japan External Trade Organization, Ukraine has abundant IT human resources, and the number of engineers working in the five major cities such as the capital Kiev and Kharkov is more than 100,000.
It is said that the background is that research in the aerospace field was active during the former Soviet Union, and the education level of science and mathematics was higher than in neighboring countries.
On the other hand, wages are low due to slow economic growth, and the average annual income of engineers developing software is $ 25,000, which is low compared to other countries in the United States and Europe.
For this reason, overseas IT companies such as Google in the United States and Samsung Electronics in South Korea have established development bases, and there are also software development bases for Japanese companies, making it a hub for the IT industry.
However, if the situation continues to be tense locally, there are unexpected risks that may affect the strategies of Japanese IT companies in the future.
Voices from Japanese companies worried about the situation of local employees
Japanese companies expanding into Ukraine are worried about the situation of local employees.
"Icely Design", an IT company headquartered in Shibuya-ku, Tokyo, has a software development base in Kharkov in northeastern Ukraine.
Due to the abundance of IT human resources in Ukraine, we set up an office 11 years ago, and although there are no Japanese expatriates, there are 15 local employees working there.
On the 24th, after it was reported that Russia had embarked on a military operation, President Yoichiro Shiba and others had an online meeting with a Ukrainian manager in the field from 5 pm to check the latest situation. ..
In this, the local manager explained that he woke up with a loud explosion sound around 5 am, but there was no big change in the city, and at that point lifelines such as the Internet and gas could be used as usual. was doing.
According to the company, it has been confirmed that all 15 employees are safe, but some of them have already evacuated their families to neighboring countries.
President Shiba said, "I am surprised that the situation has changed suddenly today. I am worried about the local situation and would like to proceed with the response while communicating closely with the employees."
In the future, the company will continue to work to the extent possible by teleworking, etc., with the safety of employees as the highest priority.