Japan bounced back to growth following its first contraction in two years, official figures showed yesterday, but fears of U.S. trade wars clouded the outlook for the world's third-largest economy. But the country is likely to struggle to grow strongly in the coming quarters.
Officials at Japan's Cabinet Office say consumer spending was up 0.7 percent after snowy weather dragged the number into negative territory in the previous period. According to government figures released Friday, the economy expanded at an annualized pace of 1.9 percent in the second quarter.
Business investment jumped 1.3 per cent following a 0.5-per cent gain in the previous quarter, thanks partly to booming construction ahead of the Tokyo 2020 Olympics.
Mizuho Research Institute senior economist Kentaro Arita estimated that potential United States tariffs could cost Japan's auto industry as much as US$10 billion (S$13.7 billion). "It's a question of how much", he said in a note to investors.
In addition, Japan's ongoing recovery is increasingly causing labor shortages worsened by a rapidly ageing population.
External demand - or exports minus imports - was expected to add 0.1 percentage point to growth, the poll found, the same rate of contribution seen in the first quarter.
That exceeded expectations for an increase of 0.3 percent following the 0.2 percent loss in the three months prior. The country's big automakers, including Toyota, Nissan and Honda, are anxious about US President Donald Trump's threats to impose tariffs on vehicle imports. "The signs point to a slower pace of overall growth".
The external environment, however, was less favourable, even without any direct impact to exports from increasing trade hostilities between the United States and its major trading partners over the quarter.
The two countries failed to reach any consensus in talks on Thursday after Japanese Economy Minister Toshimitsu Motegi insisted on Tokyo's position that it preferred multilateral free trade agreements over bilateral ones.
Trump is trying to re-negotiate the USA trade relationship with other countries to curb practices which he says are unfair to US companies and workers.