Japan has cut its assessment of exports this month for the first time in three months due to a trade dispute between the US and China, in a warning that the fallout is spreading to the world’s third-largest economy.
The Japanese Cabinet Office, which helps coordinate government policy, in its monthly economic report for this month said that exports have weakened. It marked a downgrade from last month, when it said exports had flattened.
Shipments of electronics and semiconductor manufacturing equipment to China have slowed sharply because of the trade dispute and waning smartphone demand, making it more difficult for Japan’s policymakers to ensure healthy economic growth.
“We need to keep in mind that there is uncertainty about how trade disputes and China’s economic outlook will affect the global economy,” the report said.
Japan’s exports last month fell 3.8 percent from a year earlier, its sharpest year-on-year decline since October 2016, dragged by plummeting shipments to China. Exports account for about 17 percent of the nation’s GDP.
The office left unchanged its overall assessment that the economy is in gradual recovery, but many economists have said that growth this year would not be as robust as last year, because of increasing risks to the outlook.
In addition to the US-China trade dispute, Japanese policymakers are wary of Britain’s departure from the EU and the risk of a sudden spike in the yen.
The government turned more pessimistic on consumer prices, highlighting the Bank of Japan’s struggles to generate lasting inflation.
Consumer prices have leveled off, according to the economic report for this month. Last month, the government said that gains in consumer prices were slowing.
Consumer spending this month was recovering, unchanged from last month, the government said.
It also left unchanged its assessment that capital expenditure was increasing.
Japanese Prime Minister Shinzo Abe’s Cabinet is to submit a record US$900 billion draft budget for the next fiscal year starting in April to parliament in the coming days that is already boosted by spending to offset the impact of a planned sales tax increase.
The government has also budgeted extra infrastructure spending for the current fiscal year, so it has little room to take more steps if the economy weakens further this year.
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