Japan more downbeat on economic growth

TOKYO: Japan’s government downgraded its assessment of the economy on Friday but maintained the view it was recovering, suggesting that escalating US-China trade tensions have yet to hit growth enough to put off this year’s scheduled sales tax hike. The fallout from the trade war and slowing global demand have clouded the outlook for the export-reliant economy, keeping alive market expectations that Prime Minister Shinzo Abe may postpone a twice-delayed increase in the sales tax in October. But Economy Minister Toshimitsu Motegi shrugged off such speculation, saying Japan should proceed with the tax hike. Japan needs revenues to pay for bulging welfare costs to support a fast-ageing population and curb the industrial world’s heaviest public debt burden. “There’s no change to our plan to raise the sales tax as scheduled,” he told reporters after the report was issued. “I don’t think things are that bad. Manufacturing is affected by the US-China trade dispute. But if you look at the supply side of our economy, manufacturing accounts for only 21 per cent,” he said, adding that the service sector that makes up a bulk of the economy is doing well, with consumption “holding up”. “Japan’s economy is recovering at a moderate pace, while weakness in exports and industrial production continues,” the government said in a monthly economic report. — AFP