Japan’s government announced on Friday that the economy experienced moderate recovery in December but flagged several potential challenges ahead. Key concerns include rising interest rates overseas and shifting U.S. trade policies.
Corporate Profits Show Signs of Slowing
The government downgraded its assessment of corporate profits for the first time since March 2023, citing a slower pace of recovery. “The economy is recovering moderately, although it appears to be pausing in parts,” the Cabinet Office stated in its monthly report.
Outlook Remains Cautiously Optimistic
Officials anticipate a continued moderate recovery, driven by improvements in employment and income levels. However, they remain cautious about external factors, particularly U.S. policies. President-elect Donald Trump’s proposed tariffs on imports from Canada, Mexico, and China could disrupt global trade, impacting Japan’s economy.
Higher interest rates in the U.S. and Europe, coupled with challenges in China’s real estate market, also pose potential risks, the report warned.
Economic Highlights
- Private Consumption: The government reaffirmed that private consumption, which makes up over half of Japan’s economy, is “picking up” due to wage recovery.
- Capital Spending: Investment spending by businesses continues to show signs of growth.
- Exports: The report noted exports remained “almost flat,” mirroring last month’s assessment.
