TOKYO (AP) - Japan's Cabinet Office has revised its economic growth estimate for the last quarter to an annual rate of 2.2%, down from the previously projected 2.8%. This adjustment is primarily attributed to a decline in consumer spending, which negatively impacted overall demand in the economy.
The real gross domestic product (GDP) of Japan, a key indicator that measures the total value of goods and services produced in the nation, also saw a downward revision due to higher-than-expected private inventories. This marks the third consecutive quarter of expansion for Japan's economy, with officials asserting that it is experiencing moderate recovery. On a quarter-to-quarter basis, seasonally adjusted real GDP increased by 0.6%, revised down from an earlier estimate of 0.7%. However, private demand saw a contraction of 0.3%, worse than the initial estimate of a 0.1% decline. Exports also showed a slight decrease, growing by 1.0% instead of the earlier reported 1.1%.
Japan's economic landscape is characterized by persistent deflation, which has hindered growth, unlike trends observed in the U.S. and some other countries. Despite these challenges, recent wage growth has kept deflationary pressures at bay, providing some support to the economy. However, the updated growth figures present significant challenges for the Bank of Japan's policymaking. The central bank has been anticipated to raise interest rates, particularly as annual labor-management negotiations yield larger wage increases. The Bank has stated that it will consider increasing its benchmark rate if economic conditions stabilize and prices continue to rise steadily at the targeted rate of 2%.
Moreover, the government's assessment maintains that the Japanese economy grew at a modest annual rate of 0.1%, consistent with four consecutive years of economic expansion. Moving forward, the outlook for Japan remains uncertain due to potential impacts emanating from the U.S. economic landscape and the policies of U.S. President Donald Trump, especially regarding tariffs.
Trade minister Yoji Muto traveled to Washington to engage with U.S. officials in an effort to prevent the imposition of higher tariffs on Japanese exports, particularly in sectors like steel and aluminum. Muto communicated concerns about the adverse effects that increased tariffs could have on both Japanese and American businesses, investments, and employment.
The evolving dynamics of international trade underscore the significance of Japan's interactions with other economies, especially as trade relations impact Japan's export-heavy industries. Companies in Japan are highly dependent on foreign trade, and any tariffs imposed on their exports, alongside tariffs affecting neighboring countries like China and other Asian nations, as well as Mexico and Canada, could have far-reaching consequences.
