TOKYO (Reuters) – The Japanese government on Wednesday stuck to its view that the economy was recovering moderately, but flagged U.S. trade policies as key factors to watch as President Donald Trump’s proposals on tariffs cast uncertainty over the economic outlook.
In its monthly economic report for February, the Cabinet Office maintained its overall economic assessment for the seventh consecutive month, as persistent inflation particularly of every-day items chips away at consumer appetite.
“Although data showed year-on-year increases (in wages) are continuing, the growth in consumption is suppressed when comparing with the growth in income,” a Cabinet Office official said upon the report’s release.
Japan’s economy grew at a faster-than-expected annualised rate of 2.8% in the October-December quarter on gains in business spending and a surprise increase in consumption, gross domestic product (GDP) data showed this week.
The Cabinet Office also mentioned the need to pay close attention to U.S. policies particularly on trade, with a slew of more detailed tariff announcements expected from U.S. President Donald Trump.
Trump has raised levies on imports steel and aluminium, and is targeting automobiles, and has directed his economics team to devise plans for reciprocal tariffs on every country that taxes U.S. imports. Such proposals have stoked uncertainty for investors and policymakers, and buffeted global financial markets.
Transport equipment including automobiles account for 36% of Japan’s 21.3 trillion yen ($140.12 billion) exports to the U.S., the Cabinet Office said. The transport machinery manufacturing industry accounts for 3% of Japan’s GDP.
The government raised its assessment on exports for the first time in 18 months, attributing it to increase in exports of machine tools to China as well as chip-making equipment to South Korea, Taiwan and Southeast Asian countries.
It also revised down its view on imports to “almost flat” from “showing movements from picking up recently.”
The report was presented on Wednesday at a meeting of relevant cabinet ministers and Bank of Japan Governor Kazuo Ueda.
($1 = 152.0100 yen)
(Reporting by Satoshi Sugiyama; Editing by Kim Coghill)
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