The Japanese government reiterated its warnings about the risks to economic growth from U.S. tariffs, saying in a monthly report on Wednesday that potential impact on corporate profits needed to be watched.
The U.S. will impose a 24% import tariff on Japan from July, weighing on Japan’s economy unless officials can negotiate a reduction in the tariffs. The government is also seeking exemptions for its automakers from a separate 25% import tariff.
Even before U.S. President Donald Trump announced the so-called “reciprocal” tariffs on April 2, Japan’s gross domestic product had shrunk 0.2% in the January-March quarter.
“The economy is recovering modestly, but U.S. trade policies are causing uncertainty,” Japan’s Cabinet Office said in its monthly report for June released on Wednesday, keeping its assessment of the Japanese economy unchanged for the third straight month.
In addition to tariffs, the report cited “the impact of continued price increases on household sentiment and consumption” as another negative risk to the economy.
The report also cited first-quarter business statistics as pointing to a recovery in corporate profits, but also again mentioned the potential impact of trade disruptions.
“Some companies are reluctant to release financial forecasts due to uncertainty over U.S. tariffs, and their impact on earnings may only be apparent in data for the April-June quarter or later,” a Cabinet Office official told a news conference.
The official added that while U.S. tariffs have not had a significant impact on Japan’s export volumes so far, trade trends since May need to be watched.
On the wage front, wage negotiations this spring could lead to an average wage increase of more than 5% above last year’s level, the official said, based on data from national labor group Rengo, although wage increases at small companies lag behind those at larger firms.
Prime Minister Shigeru Ishiba said earlier this week that his ruling party would pledge to achieve an average income increase of more than 50% in Japan by 2040 as he campaigns for next month’s upper house election.
