On Tuesday, the Japanese government reaffirmed its view that the economy is experiencing moderate recovery, though it expressed concerns about potential risks stemming from U.S. President-elect Donald Trump’s policies. A Cabinet Office official highlighted that changes in the U.S. economy could have both direct and indirect effects on Japan, particularly through fluctuations in financial and capital markets.
Trump’s proposals, including a 25% tariff on goods from Mexico and Canada, and a 10% tariff on Chinese imports, were noted as potential threats. Additionally, risks such as rising foreign interest rates and the stagnation of China’s real estate market were identified as concerns for Japan’s economic outlook.
Despite these challenges, the government maintained its assessment of moderate recovery in Japan’s economy, unchanged for the fourth consecutive month. The outlook for key sectors like consumption and capital investment remained positive, while the government raised its evaluation of imports and downgraded its outlook for public investment. The report also indicated that domestic corporate goods prices and consumer prices were gradually rising, driven by factors like a weak yen and higher raw material and logistics costs.
Private consumption, which makes up over half of Japan’s GDP, continued to recover, supported by wage increases, strong bonuses, and temporary tax cuts. The report was presented on Tuesday during a meeting attended by relevant cabinet ministers and Bank of Japan Governor Kazuo Ueda. Japan’s economy grew at an annualized rate of 0.9% in the July-September quarter, marking a slowdown from the previous quarter due to weak capital spending. However, a surprising increase in consumption provided a positive highlight during this period.
