The Japanese government on Monday maintained its view that the economy is recovering moderately but said higher U.S. tariffs are adversely affecting the auto industry.
In its September monthly economic report, the Cabinet Office upgraded its assessment of private consumption for the first time in 13 months, citing improvement in consumer sentiment on the back of income growth and a pause in fresh vegetable price increases.
It also lifted the view on capital investment for the first time in 18 months, saying it is “picking up moderately,” reflecting corporate moves to boost investment in software development in addition to machinery equipment.
While keeping intact its overall evaluation, the report said, “the effects caused from the U.S. trade policies are seen mainly in the automotive industry” after hefty tariffs were imposed in April under President Donald Trump.
The reference to the specific industry came after government data showed profits among manufacturing firms plunged 11.5 percent in the April-June quarter from a year earlier, dragged down by a 29.7 percent drop in the transport equipment sector, including automobiles.
The auto tariff of 27.5 percent was reduced to 15 percent in September following a Japan-U.S. trade agreement in July, a move that helped improve corporate and consumer sentiment, the office said.
The latest report said private consumption “shows movements of picking up,” after assessing in August that “the improvement in consumer sentiment is slow.” Consumer spending is a key component of gross domestic product, accounting for more than half of Japan’s economy.