IMF Cuts Japan 2018 Growth Outlook

July 17, 2018

Washington- The International Monetary Fund on Monday lowered its growth outlook for Japan's economy for this year to 1.0 pct, a reduction of 0.2 percentage point from its April prediction.

While maintaining its global growth projection at 3.9 pct for both 2018 and 2019, the IMF warned that downside risks "have become more salient, most notably the possibilities of escalating and sustained trade actions, and of tighter global financial conditions."

"Avoiding protectionist measures and finding a cooperative solution that promotes continued growth in goods and services trade remain essential to preserve the global expansion," the international body said in its World Economic Outlook update.

"Our modeling suggests that if current trade policy threats are realized and business confidence falls as a result, global output could be about 0.5 pct below current projections by 2020," IMF chief economist Maurice Obstfeld said.

The IMF also warned, "Tighter financial conditions could potentially cause disruptive portfolio adjustments, sharp exchange rate movements, and further reductions in capital inflows to emerging markets."

The IMF cut its Japan growth forecast for the first time in two years, "following a contraction in the first quarter, owing to weak private consumption and investment," it said.

But the IMF said Japan's economy "is expected to strengthen over the remainder of the year and into 2019, aided by stronger private consumption, external demand, and investment," the IMF said. It kept its 2019 Japan growth forecast unchanged at 0.9 pct.

For the U.S. economy, the IMF kept unchanged its 2018 and 2019 growth forecasts at 2.9 pct and 2.7 pct, respectively.

"Substantial fiscal stimulus together with already-robust private final demand will lift output further above potential," the IMF said of the U.S. economy.

"Imports are set to pick up with stronger domestic demand, increasing the U.S. current account deficit and widening excess global imbalances," the IMF said.

The IMF cut its eurozone growth projection by 0.2 point to 2.2 pct for 2018 and by 0.1 point to 1.9 pct for 2019 after activity softened more than expected in the first quarter in Germany and France.

"The rate of expansion appears to have peaked in some major economies," the IMF said, apparently referring to Japan and the eurozone.

The IMF kept its China growth forecast unchanged at 6.6 pct for 2018 and at 6.4 pct for 2019. Jiji Press