TOKYO (Reuters) – Japan’s government maintained a cautious economic outlook on Thursday, partly because policymakers kept a wary eye on U.S. President Donald Trump’s policies and their potential impact on global growth.
The government also said fluctuations in financial markets were among other factors to watch, and maintained its view of a moderate recovery in the economy in January, supported by steady wage increases and a strong business sector.
“Executives targeting various policies such as immigration policy and energy policy, which would impact economies both inside and outside the United States, are being developed in the States “United,” a Cabinet Office official said.
Trump’s threats of tariffs against his major trading partners have fueled uncertainty for investors and policymakers, and rattled global markets before and after his Nov. 5 U.S. election.
Most Japanese companies operating in the United States are bracing for the consequences of Trump’s policies, according to a survey released last week.
The Cabinet Office report said that Japan’s investment in the United States increased, ranking first for the fifth consecutive year since 2019. Japanese companies also contribute to job creation in the United States, ranking first place in the manufacturing sector, he adds.
In the January report, the government maintained its views on most key economic areas. Private consumption, which represents more than half of the Japanese economy, was “recovering” and corporate profits were “recovering overall”.
The government expects the economy to continue to recover gradually, driven by an improvement in the employment and wage environment, the report said.
Japan’s base wage, or regular wage, rose in November at the fastest pace since 1992, after major companies agreed to raise wages during spring wage negotiations.
The country’s biggest business lobby, Keidanren, and unions kicked off this year’s wage negotiations on Wednesday and policymakers will focus on the extent to which the momentum will spill over to small businesses.
The monthly report comes ahead of the Bank of Japan’s monetary decision following its January 23-24 meeting. The central bank is likely to raise interest rates barring Trump-induced market shocks and maintain its commitment to continue raising borrowing costs if the economy continues to recover.