Concerns growing over impact on Japan from U.S.-China tensions

May 9, 2019

Tokyo--Concerns are growing in Japan over the possible impact on its economy from intensifying trade tensions between the United States and China.

Some private economists estimate that the trade war could push down Japan's annual exports by almost one pct. Japan's exports to China account for about 20 pct of the country's total.

The United States plans to raise tariffs on 200 billion dollars' worth of Chinese goods from the current 10 pct to 25 pct on Friday.

Shunsuke Kobayashi, economist at the Daiwa Institute of Research, forecasts that the higher tariffs would hold back a recovery in the Chinese economy, which has been expected to become evident starting in the latter half of this year.

He estimates that Japan's annual exports would be dragged down by nearly one pct due to a possible decrease in demand in China for Japanese electronics parts and manufacturing equipment.

In addition, U.S. President Donald Trump has expressed his readiness to impose 25 pct tariffs on the remaining Chinese goods that currently are not subject to U.S. sanctions.

Shinichiro Kobayashi, chief researcher at Mitsubishi UFJ Research and Consulting Co., predicts that 25 pct tariffs on all Chinese goods would drive down China's annual growth rate below 6 pct, eroding Japanese exports, production and capital investment.

If Washington slaps 25 pct tariffs on all Chinese goods and Beijing retaliates, the economic growth rate would be pushed down by one percentage point in China, 0.8 point in the United States and 0.5 point in the world by 2021, according to an estimate from the Organization for Economic Cooperation and Development.

Japan's Cabinet Office is highly likely to lower its assessment of the index of coincident economic indicators to "worsening," a wording that has not been seen for some six years, on Monday when it releases preliminary data for March.

Furthermore, separate Cabinet Office data, due May 20, are expected to point to the country's first negative growth in two quarters for the January-March period.

Kobayashi believes that the Japanese economy will inevitably enter a period of recession if the planned consumption tax increase in October dents consumption while China's slowdown persists. Jiji Press