Japan downgrades view of export picture as costs of trade war rise

TOKYO (Reuters) – Japan’s government downgraded its assessment of exports for the first time in two months amid signs of a slowing in shipments due to the trade war between the United States and China.

Japanese exports are flat, the Cabinet Office said in its monthly economic report for October, which marked a downgrade from the previous month’s assessment that the recovery in exports was stalling.

In the report for October, released on Tuesday, the government left unchanged its overall assessment that the economy is recovering at a moderate pace.

“We expect exports to recover, but we need to pay attention to how trade friction is affecting the global economy,” the Cabinet Office said in the report.

China’s third quarter economic growth slowed to its weakest pace since the global financial crisis, and missed expectations, as a years-long campaign to tackle debt risks and the trade war with the United States began to bite, data last week showed.

Washington and Beijing have slapped tit-for-tat tariffs on each other in recent months, and plans for bilateral trade talks to resolve the dispute have stalled.

Japan is at risk because it exports to China much manufacturing equipment and electronic parts, which are used to make finished goods for the United States and other markets.

The Cabinet Office flagged a recent slowdown in shipments of gear that Chinese companies use to make smartphones, which suggests demand for these gadgets could be waning.

The government left unchanged its assessment that consumer spending is recovering, but expressed concern about a recent earthquake in the northern island of Hokkaido and severe flooding in western Japan.

The report said capital expenditure is rising, a view unchanged from September.

The government also left unchanged its assessment that industrial output is gradually rising.

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