World Bank Cuts 2018 Japan Growth Forecast

June 6, 2018

Washington- The World Bank on Tuesday lowered its forecast for Japan's economic growth this year to 1.0 pct from its January projection of 1.3 pct.

Japan's economic growth is expected to decelerate to 0.8 pct in 2019 and 0.5 pct in 2020, the bank said.

"Higher oil prices erode real incomes, employment growth slows, and fiscal consolidation starts to drag on growth, notably due to the effects" of a consumption tax increase set for October next year, it said.

The bank kept its global growth estimate for this year at 3.1 pct. But it pointed to "escalating trade protectionism" as a downside risk, apparently referring to trade frictions caused by U.S. President Donald Trump's "America First" policy.

"A worldwide escalation of tariffs up to the limits permitted under existing international trade rules could lead to cumulative trade losses equivalent to those experienced during the global financial crisis in 2008-09," it said.

The bank also said, "The possibility of financial market disruptions has increased amid shifting monetary policy expectations in major advanced economies."

"A sudden tightening of global financing conditions, combined with disorderly exchange rate movements, would leave highly indebted EMDEs particularly vulnerable," it said, using the acronym for emerging market and developing economies.

The bank boosted its U.S. growth estimate to 2.7 pct for 2018 and 2.5 pct for 2019. Eurozone growth is expected to be supported by "continued monetary policy stimulus," it said.

Among EMDEs, China is projected to enjoy solid growth, the bank said.

It said growth in Argentina, which has asked the International Monetary Fund for financial assistance due to its economic difficulty, is expected to decelerate to 1.7 pct this year before recovering slightly to 1.8 pct in 2019. Previously, the bank projected Argentina's growth at 3.0 pct both for this year and 2019. Jiji Press