Will Japan benefit from US-China tensions?
The Bank of Japan is forecasting that the world’s 3rd largest economy will grow by 1.4% for the current fiscal year.
Though this is a very low growth rate, it is an improvement for the Japanese economy – which has been mired in stagnation for over two decades.
The growth forecast has been raised to 1.4%, from the current forecast of 1.0%.
“Japan’s exports and manufacturing have showed clear signs of recovery compared to a quarter ago, thanks to the improvement in the global economy, rebound in commodity prices and depreciation of the yen,” said an analyst.
Inflation to rise
Japan is also expecting inflation to hit their target of 2.0, again representing an improvement.
Japan has been stuck in low inflation, and even deflation, as their population and economic output shrinks. They have experimented – in a limited fashion – with negative interest rates, and have been at zero interest rates for a long period of time.
Those central bank policies speak to the desperation of the Japanese government to grow the economy, something that has been surprisingly elusive until recently.
Japan still relevant in global economy, could benefit from Trump
Though Japan has struggled for many years, they are still the world’s third largest economy, and are still very relevant in the world economy.
Japan may be poised to benefit from US President Donald Trump, who favours Japan over their rival China, and may direct more economic activity to the democratic island nation. Japanese manufacturing could also benefit from crackdowns on China’s manipulative trade practices.
Trump has also expressed more of a willingness to see military build-ups in American allies, something that matches the goals of Japan’s Prime Minister Shinzo Abe, who has sought to increase the size and strength of the Japanese military.
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