Japan GDP expected to improve, but trade risks remain - Reuters

As reported by Reuters, Japan is expecting a positive reading of GDP figures for Friday, but headwinds remain in place as trade wars threaten global stability.

Key quotes

"The economy is forecast to have grown 1.4 percent on an annualized basis in April-June. That would follow a 0.6 percent annualized contraction in the previous quarter, which put an end to the best run of growth since the 1980s bubble economy.

Japan’s economy is expected to continue growing due to consumer spending, but there is growing unease about the pace of future growth, economists say.

U.S. President Donald Trump’s administration may ask Japan to take specific steps to lower its trade surplus with the United States as Trump threatens China with higher tariffs, which could spark a global trade war.

“Consumer spending and capital expenditure should bounce back in the second quarter, but I am still worried,” said Shuji Tonouchi, senior market economist at Mitsubishi UFJ Morgan Stanley Securities.

“Protectionism and a slowdown in exports are big uncertainties that could weaken Japanese business investment. The signs point to a slower pace of overall growth.”

Compared to the previous quarter, gross domestic product (GDP) is forecast to have risen 0.3 percent in April-June after a 0.2 percent contraction in January-March, according to a Reuters poll of 16 economists.

The United States has pressured Japan for a bi-lateral free-trade agreement as a way to lower the U.S. trade deficit.

Japan has repeatedly said it prefers multilateral trade negotiations, which put it at loggerheads with the United States.

Trump is trying to re-negotiate the U.S. trade relationship with other countries to curb practices which he says are unfair to U.S. companies and workers.

This has lead to an increase in tension between the United States and China as the world’s two largest economies exchange retaliatory tariffs.

Japan’s core machinery orders, a leading indicator of capital expenditure, tumbled in June at the fastest pace in six months, data showed on Thursday, adding to fears about the strength of business investment.