When carmaker Mazda sneezes, everyone catches a cold, say people in its hometown of Hiroshima in western Japan, but these days car parts maker Yuji Yamaguchi fears a deep chill is on the way.
"If Mazda builds fewer cars our orders will drop," said Yamaguchi, whose 110-year-old firm, Nanjo Auto Interior, has almost 1,000 employees making door panels and other parts for the carmaker, which accounts for more than 90% of its sales.
"The key thing is whether we can remain profitable with lower volumes."
The economic engine of Hiroshima, a manufacturing hub 800km southwest of Tokyo, Mazda faces US tariffs of 25% on cars, a dispiriting prospect for an electorate battling inflation and a weak economy.
Japan votes on Sunday in an upper house election that looks set to weaken the grip on power of Prime Minister Shigeru Ishiba, who has failed to win a tariff reprieve from the US, its closest ally and a crucial trade partner.
"I no longer have expectations of the Japanese government," said Yamaguchi, a great-grandson of Mazda founder Jujiro Matsuda. "I'm past frustration and have resigned myself to things."
As people in Hiroshima and other car manufacturing regions brace for the inevitable fall-out from tariffs, Yamaguchi said he had little hope the government could turn the tide.
US President Donald Trump has given no sign of relenting on his tariffs, and has even hinted at raising those against Japan.
Mazda, which saw US sales fall 18.6% in May on the year and by 6.5% in June, is one of the Japanese carmakers most exposed to US tariffs. Imports bring in most of Mazda's American sales, but the importance of the wider industry for Japan is almost impossible to overstate.
After Japan ceded global leadership in chips and consumer electronics, its car industry has grown to make up about 28% of the about $145bn (R2.58-trillion) worth of goods shipped to the US last year.
There are more than 68,000 companies in Japan's car supply chain, a July survey by research firm Teikoku Data Bank showed, and the Jama industry group said they employ 5.6-million people, or about 8% of the labour force.
"A supply chain is hard to rebuild once broken," said Hideki Tsuchikawa, research head at Teikoku Databank’s branch in Hiroshima, which his firm estimates is home to more than 2,000 car suppliers. "Automobiles are a core national industry. Government support is essential."
The tariffs could cost Mazda and other smaller Japanese carmakers US market share lost to bigger rivals, said Julie Boote, an autos analyst at Pelham Smithers Associates in London.
Mazda, headquartered in Hiroshima where it has assembly plants, has so far declined to give a full-year earnings outlook, citing the uncertainty of tariffs.
Mazda told Reuters its top priority was to protect suppliers, dealers and employees as it looked to overcome the tariff impact. It anticipated significant impact in the short term, the company said, adding it was taking all possible steps, such as asking for government countermeasures.
'No overtime, no drinking'
It is hard to say whether the uncertainty will further deepen voter anger over time, or how much opposition parties will be able to chip away at Ishiba's support as they look to tap into voter discontent.
For the car industry there seems to be no recourse except to return to a well-worn playbook of cost-cutting perfected during Japan's years of stop-start economic growth.
No overtime means no extra money for drinking, said Koji Sasaki, the 54-year-old owner of a bar in the town of Fuchu close to Mazda's headquarters, where the carmaker's employees usually form the bulk of customers.
Their numbers have dropped in recent months, with some regulars apologising for making fewer visits, he said.
Drinking in Sasaki's bar on a recent July night was company veteran Toshiyuki Shimizu, 45, who said Mazda had cut back on overtime and business travel for employees.
"We used to bring junior staff along on business trips, but now I often go alone," said Akira Ichigi, a 32-year-old Mazda colleague, adding the limits denied junior employees valuable experience acquired on the trips.
Mazda has set up a tariff strategy team that was meeting each week in Hiroshima, said one company insider, speaking on condition of anonymity. However, Mazda faced constraints in finding ways to tackle the tariffs from a labour shortage in the US that kept it from boosting capacity at its only plant there, operated with Toyota, the source said.
Mazda said overtime cuts and a business travel review were part of its drive to cut 100-billion yen in costs. Essential travel continued, but it was evaluating whether accompanying staff were necessary, it said.
The company set up a team to monitor tariffs and was working with suppliers and dealers, it said, adding key to increasing supply to the US market were its efforts to tackle labour shortages and strengthen the supply chain.
Parts supplier Yamaguchi said he was not considering specific steps to counter the tariffs.
"In business we need to have long-term vision," Yamaguchi said, likening the moment to the Covid-19 pandemic when his company posted a loss in 2020 but returned to profit the next year by working to boost efficiency rather than cutting costs.
"If we don’t invest in 2025 we might miss opportunities."
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