Another day, another piece of evidence that President Donald Trump’s escalating trade war with friends and foes is hurting the global economy. Today: Japan’s central bank cut its economic growth forecast for the country in half.
The Bank of Japan on Thursday lowered its expectations for 2025 gross domestic product growth to an anemic 0.5%, down from the previous projection of +1.1%, made in January. It also cut its growth forecast for next year to 0.7%, down from the previous projection of +1.0%.
“Japan’s economic growth is likely to moderate, as trade and other policies in each jurisdiction lead to a slowdown in overseas economies and to a decline in domestic corporate profits and other factors,” Japan’s central bank said in a statement.
The bank noted, however, that the on-again, off-again trade war has clouded its outlook.
“It is extremely uncertain how trade and other policies in each jurisdiction will evolve and how overseas economic activity and prices will react to them,” it said.
Japan is at the top of the list of countries with which the Trump administration said it is negotiating a trade deal.
Trump at a NewsNation town hall event Wednesday said he has reached “potential” trade agreements with Japan, South Korea and India, which would replace punishing “reciprocal” tariffs, although he did not provide details of those new deals.
But Trump also pooh-poohed the urgency of doing trade deals, noting, “They want us. We don’t need them.” He also said he wasn’t in a hurry to complete any deal.
It’s highly unlikely that the United States and Japan, though allies, would be able to reach a complex new trade agreement quickly, anyhow. However, the Trump administration has repeatedly said it is in active talks with more than a dozen countries and expects to reveal at least some memoranda of understanding about negotiating terms for revised trade deals in the coming days and weeks.
Japan’s forecast came a day after the US Commerce Department reported that the trade war hurt economic growth, sending America’s economy into slight contraction in the first quarter. Consumer spending decelerated during the quarter and businesses stockpiled imported goods ahead of tariffs. That meant imports exceeded exports, dragging down GDP growth.
Also on Wednesday, China reported that its factory activity contracted in April at the fastest pace in 16 months because of America’s massive tariffs on its goods and China’s significant retaliatory tariffs on American imports.
The International Monetary Fund last month warned that the global trade war will stymie growth, particularly in the United States.
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