TOKYO: Japan’s government reiterated its warning on the risks from U.S. tariffs on economic growth, saying in a monthly report on Wednesday that the potential impact on corporate profits needed attention.

The economy faces pressure from U.S. import levies of 24% from July unless officials can negotiate them down. Japan’s government is also seeking an exemption for its carmakers from a separate 25% import tariff on vehicles.

Japan’s gross domestic product shrank an annualised 0.2% in the January-March quarter, even before U.S. President Donald Trump announced his so-called “reciprocal” tariffs on April 2.

“The economy is recovering moderately, while uncertainty is arising from U.S. trade policies,” the Cabinet Office said in its monthly report for June released on Wednesday, keeping the assessment unchanged for a third month.

In addition to tariffs, the report maintained its reference to “the effect of continued price rises on household sentiment and consumption” as another negative risk to the economy.

It also noted that corporate profits were recovering, citing first-quarter business statistics, but added a fresh reference to the potential impact of trade disruptions.

“With some firms withholding financial forecasts amid uncertainties surrounding U.S. tariffs, their impact on earnings may come to light only in the data for the April-June quarter or beyond,” an official at the Cabinet Office told a press briefing.

While no significant impact from U.S. tariffs on Japan’s export volumes has been seen so far, trade trends from May onwards required attention, the official added.

On wages, this spring’s pay negotiations probably led to an average raise of more than 5%, exceeding last year’s, although smaller firms lagged bigger companies, the official said, based on the national labour group Rengo’s data.

Prime Minister  ISHIBA Shigeru said earlier this week that his ruling party would pledge to achieve growth of more than 50% in Japan’s average income by 2040 in campaigning for the upper house elections next month. 

Reuters