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Japan Times
4 days ago
- Business
- Japan Times
Japan lowers this year's growth forecast as tariffs kick in
Japan cut its growth forecast for the current fiscal year as U.S. tariffs and persistent inflation weigh on the economy, complicating the policy course of the Bank of Japan and adding to pressure on embattled Prime Minister Shigeru Ishiba. The government revised its real growth projection for fiscal year 2025 to 0.7%, down from the previous forecast of 1.2%, the Cabinet Office said Thursday. The downgrade partly reflects a darkening global economic outlook as a result of U.S. President Donald Trump's tariff policies, it said. Trump has imposed tariffs on countries around the world, including a 15% across-the board levy on Japanese exports to the U.S. While that's down from the originally proposed 25%, it is still expected to drag on corporate profits. The U.S. has also yet to implement agreed tariff cuts on vehicles and auto parts, which are key exports for Japan. There's also new confusion over whether the 15% across-the board tariffs will be added on top of existing levies. In its latest outlook, the government lowered its view on private consumption amid inflationary pressures. Private spending is now expected to grow 1% this fiscal year, down from a January forecast of 1.3%, according to the Cabinet Office. Inflation, as measured by the broad consumer price index, is forecast to reach 2.4% this fiscal year, up from the prior forecast of 2%. Rising inflation has fueled expectations of a rate hike in the coming months, although the BOJ is also likely to be wary of slowing growth. In a survey conducted last week, over 60% of economists said they expected a rate increase as early as October. The softer economic picture adds political pressure on Ishiba, whose standing has weakened following his ruling party's loss in last month's Upper House election. Ishiba has been reluctant to accept opposition parties' calls for cuts to the sales tax, but he may be forced to propose broader price relief steps beyond plans for one-off cash handouts. Japan will release gross domestic product figures for the three months ending June on August 15. Alongside the growth revision, the Cabinet Office updated its projection for the primary balance, a key indicator of fiscal health. The balance shows government revenue minus expenditures, excluding interest payments on public debt. The government still expects to achieve a primary balance surplus in the fiscal year starting April 2026, consistent with targets in its latest economic policy blueprint. Compared with its January forecast, the government projected a higher primary balance surplus for fiscal 2026 at ¥3.6 trillion ($24.4 billion), supported by expectations of increased tax revenue. Japan saw record tax receipts of ¥75.2 trillion last fiscal year, a trend the government expects to continue into the next fiscal period. Still, Japan's public finances remain strained by its massive debt burden. The country's general government debt stands at 235% of GDP, the highest among advanced economies, according to the International Monetary Fund. Notably, the latest projections do not factor in potential spending on additional economic stimulus, which seems increasingly likely as both ruling and opposition parties call for further relief measures to ease the impact of rising prices. For the current fiscal year, the government initially forecast a primary balance surplus but later revised it to a deficit after accounting for an extra budget.
Yahoo
5 days ago
- Business
- Yahoo
Japan Lowers This Year's Growth Forecast as Tariffs Kick in
(Bloomberg) -- Japan cut its growth forecast for the current fiscal year as US tariffs and persistent inflation weigh on the economy, complicating the policy course of the Bank of Japan and adding to pressure on embattled Prime Minister Shigeru Ishiba. All Hail the Humble Speed Hump Mayor Asked to Explain $1.4 Billion of Wasted Johannesburg Funds Three Deaths Reported as NYC Legionnaires' Outbreak Spreads Major Istanbul Projects Are Stalling as City Leaders Sit in Jail PATH Train Service Resumes After Fire at Jersey City Station The government revised its real growth projection for fiscal year 2025 to 0.7%, down from the previous forecast of 1.2%, the Cabinet Office said Thursday. The downgrade partly reflects a darkening global economic outlook as a result of US President Donald Trump's tariff policies, it said. Trump has imposed tariffs on countries around the world, including a 15% across-the board levy on Japanese exports to the US. While that's down from the originally proposed 25% it is still expected to drag on corporate profits. The US has also yet to implement agreed tariff cuts on vehicles and auto parts, which are key exports for Japan. There's also new confusion over whether the 15% across-the board tariffs will be added on top of existing levies. In its latest outlook, the government lowered its view on private consumption amid inflationary pressures. Private spending is now expected to grow 1% this fiscal year, down from a January forecast of 1.3%, according to the Cabinet Office. Inflation, as measured by the broad consumer price index, is forecast to reach 2.4% this fiscal year, up from the prior forecast of 2%. Rising inflation has fueled expectations of a rate hike in the coming months, although the BOJ is also likely to be wary of slowing growth. In a Bloomberg survey conducted last week, over 60% of economists said they expected a rate increase as early as October. The softer economic picture adds political pressure on Ishiba, whose standing has weakened following his ruling party's loss in last month's Upper House election. Ishiba has been reluctant to accept opposition parties' calls for cuts to the sales tax, but he may be forced to propose broader price relief steps beyond plans for one-off cash handouts. Japan will release gross domestic product figures for the three months ending June on August 15. Alongside the growth revision, the Cabinet Office updated its projection for the primary balance, a key indicator of fiscal health. The balance shows government revenue minus expenditures, excluding interest payments on public debt. The government still expects to achieve a primary balance surplus in the fiscal year starting April 2026, consistent with targets in its latest economic policy blueprint. Compared with its January forecast, the government projected a higher primary balance surplus for fiscal 2026 at ¥3.6 trillion ($24.4 billion), supported by expectations of increased tax revenue. Japan saw record tax receipts of ¥75.2 trillion last fiscal year, a trend the government expects to continue into the next fiscal period. Still, Japan's public finances remain strained by its massive debt burden. The country's general government debt stands at 235% of GDP, the highest among advanced economies, according to the International Monetary Fund. Notably, the latest projections do not factor in potential spending on additional economic stimulus, which seems increasingly likely as both ruling and opposition parties call for further relief measures to ease the impact of rising prices. For the current fiscal year, the government initially forecast a primary balance surplus but later revised it to a deficit after accounting for an extra budget. Russia's Secret War and the Plot to Kill a German CEO The Pizza Oven Startup With a Plan to Own Every Piece of the Pie AI Flight Pricing Can Push Travelers to the Limit of Their Ability to Pay A High-Rise Push Is Helping Mumbai Squeeze in Pools, Gyms and Greenery Government Steps Up Campaign Against Business School Diversity ©2025 Bloomberg L.P. Sign in to access your portfolio
Yahoo
5 days ago
- Business
- Yahoo
Japan cuts growth forecast on US tariffs drag, weaker consumption
By Makiko Yamazaki TOKYO (Reuters) -Japan's government cut its growth forecast for this fiscal year on Thursday as U.S. tariffs slow capital expenditure and persistent inflation weighs on private consumption, threatening a fragile economic recovery. In revised estimates presented at a meeting of Japan's top economic council, the government cut its inflation-adjusted gross domestic product growth forecast for the year ending in March 2026 to 0.7% from 1.2% projected in January. The new forecast, still above private-sector forecasts for 0.5% growth, reflects worries that U.S. tariffs will make Japanese companies more cautious about capital expenditures and drag down exports, both key drivers of Japan's economic growth. The outlook for private consumption, which accounts for more than half of Japan's economy, was also lowered as inflation continues to squeeze households. The private-sector members of the economic council warned that inflation could further dampen consumer spending if it accelerates. "The Bank of Japan should pursue its price stability mission and sustainably and stably meet it's 2% inflation target," the members said. For the next fiscal year from April, the government projected growth to pick up slightly to 0.9%, retaining its view the economy will sustain a domestic demand-led recovery as it predicts wage growth will outpace inflation and boost private consumption. The government maintained its outlook for delivering a primary budget surplus in fiscal 2026 for the first time in decades, predicting even a larger surplus of 3.6 trillion yen ($24.39 billion) thanks to higher tax revenues. The primary budget balance, which excludes new bond sales and debt-servicing costs, is a key gauge of the extent to which policy measures can be funded without resorting to debt. But the rosy outlook has not factored in potential tax cuts and cash handouts that the government has been considering amid growing pressure from the opposition for more aggressive spending to ease rising living costs. Prime Minister Shigeru Ishiba's grip on power has been further weakened by a bruising defeat for his ruling coalition this month in upper house elections after having lost its lower house majority last October. ($1 = 147.5900 yen)
Reuters
5 days ago
- Business
- Reuters
Japan cuts growth forecast on US tariffs drag, weaker consumption
TOKYO, Aug 7 (Reuters) - Japan's government cut its growth forecast for this fiscal year on Thursday as U.S. tariffs slow capital expenditure and persistent inflation weighs on private consumption, threatening a fragile economic recovery. In revised estimates presented at a meeting of Japan's top economic council, the government cut its inflation-adjusted gross domestic product growth forecast for the year ending in March 2026 to 0.7% from 1.2% projected in January. The new forecast, still above private-sector forecasts for 0.5% growth, reflects worries that U.S. tariffs will make Japanese companies more cautious about capital expenditures and drag down exports, both key drivers of Japan's economic growth. The outlook for private consumption, which accounts for more than half of Japan's economy, was also lowered as inflation continues to squeeze households. The private-sector members of the economic council warned that inflation could further dampen consumer spending if it accelerates. "The Bank of Japan should pursue its price stability mission and sustainably and stably meet it's 2% inflation target," the members said. For the next fiscal year from April, the government projected growth to pick up slightly to 0.9%, retaining its view the economy will sustain a domestic demand-led recovery as it predicts wage growth will outpace inflation and boost private consumption. The government maintained its outlook for delivering a primary budget surplus in fiscal 2026 for the first time in decades, predicting even a larger surplus of 3.6 trillion yen ($24.39 billion) thanks to higher tax revenues. The primary budget balance, which excludes new bond sales and debt-servicing costs, is a key gauge of the extent to which policy measures can be funded without resorting to debt. But the rosy outlook has not factored in potential tax cuts and cash handouts that the government has been considering amid growing pressure from the opposition for more aggressive spending to ease rising living costs. Prime Minister Shigeru Ishiba's grip on power has been further weakened by a bruising defeat for his ruling coalition this month in upper house elections after having lost its lower house majority last October. ($1 = 147.5900 yen)
Free Malaysia Today
31-07-2025
- Business
- Free Malaysia Today
Bank of Japan holds rates, flags trade ‘uncertainties'
The Bank of Japan has raised its growth projection this year to 0.6% from 0.5%. (Reuters pic) TOKYO : The Bank of Japan (BOJ) kept its main interest rate unchanged today, hiking its inflation and growth forecasts while also flagging 'high uncertainties' from US President Donald Trump's trade policies. Maintaining its main rate at 0.5%, as expected, the BoJ hiked its projection for inflation excluding fresh food this year to 2.8% from 2.3% previously. It also raised its growth projection this year to 0.6% from 0.5%. In a statement, it said growth was 'likely to moderate as trade and other policies in each jurisdiction lead to a slowdown in overseas economies and to a decline in domestic corporate profits and other factors'. However, it added that 'factors such as accommodative financial conditions are expected to provide support'. 'Thereafter, Japan's economic growth rate is likely to rise, with overseas economies returning to a moderate growth path,' it said. The bank welcomed 'positive developments' in global trade, pointing to Trump's recent agreement with Japan announced last week. 'That said, high uncertainties remain,' it warned, adding that 'trade policies announced so far are likely to push down domestic and overseas economies through various channels'. While other central banks have been on a tightening trajectory in recent years the BoJ had remained an outlier. It finally lifted rates above zero in March 2024, signalling an end to Japan's 'lost decades' of stagnation and static or falling prices. It has since raised them again, the last in January taking borrowing costs to a 17-year high of 0.5%. However, they have remained on hold since because of turmoil over Trump's trade policies. Yesterday, the US Federal Reserve resisted pressure from Trump and kept its main rate unchanged. Tokyo and Washington last week announced a deal that will see Japanese shipments to the US – excluding steel and aluminium – hit with a 15% tariff. Other accords have also been struck including with Britain, Vietnam, the EU and, as of yesterday, South Korea. Trump announced yesterday that Indian imports will face 25% and Trump's trade war with China will resume on Aug 12 if there is no deal. Inflation Inflation in Japan has been above the BoJ's 2% target for around three years but the BoJ sees this as driven by temporary factors such as high rice prices. However, Marcel Thieliant at Capital Economics said that the BoJ sounded 'a bit more optimistic', reinforcing its expectation that it will resume tightening in October. '(We) think that a further upward revision to the bank's inflation forecasts at its October meeting will be accompanied by another 25 basis point rate hike,' Thieliant said in a note. Uncertainty could come from Prime Minister Shigeru Ishiba's coalition being in a minority in both houses of parliament and facing opposition pressure to cut taxes. 'Even if the opposition parties gain more influence over policy… the BOJ is unlikely to change its stance on further interest rate hikes,' Takahide Kiuchi at Nomura Research Institute said. 'However, the pace of rate hikes may slow down,' Kiuchi said in a note published before today's BoJ decision.
