TOKYO (Reuters) – Japan downgraded its assessment of exports for the first time in three years amid growing concern that a trade war between the United States and China will disrupt global supply chains and export demand.
Japan’s government also offered a more pessimistic assessment of consumer prices as inflationary pressure fails to build, and official pressure on companies to lower smart phone charges suggests the inflation pace could slow.
In its monthly report for August released on Wednesday, the government kept intact for an eighth straight month its overall assessment that Japan’s economy was “recovering at a moderate pace”.
However, the report said a recovery in exports is stalling, a downgrade from last month when the government said exports were recovering.
Exports of cars to the United States have slowed recently, while shipments of smart phone parts to China have also started falling, a government official told reporters.
U.S. and Chinese officials ended two days of talks last week with no breakthrough as their trade war escalated with activation of another round of dueling tariffs on $16 billion worth of each country’s goods.
There is a risk that Japan’s exports will suffer if trade friction between the United States and China continues, a Japanese government official told reporters.
“Demand for new cars in the United States has weakened, which is behind the recent slowdown in Japan’s auto exports,” said Norio Miyagawa, senior economist at Mizuho Securities.
“However, Japan’s auto exports could take a serious hit in the future if tariffs rise.”
Japan’s consumer prices are rising at a slower tempo than previously, the government’s report for August said.
Annual consumer inflation stalled in July, hindering the Bank of Japan’s efforts to achieve its elusive price target.
The government is pressuring mobile carriers to lower the burden of smartphone costs for households, hoping it can stimulate spending in other areas and boost overall consumption.
But if smartphone users don’t immediately start spending elsewhere, this measure could backfire.
Japan’s economy rebounded in the second quarter from a contraction in the first three months of this year, thanks to robust business spending, but there are concerns trade protectionism will begin to curb growth.
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