10-25-2022, 09:05 AM
Rising US rates pose biggest risk for Japan but recession unlikely
The biggest risk to Japan's economy over the next year is a prolonged period of US monetary tightening, although the world's third-largest economy is unlikely to sink into a recession, the majority of economists polled by Reuters said.
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Tuesday's (Oct 25) survey result came as Japan struggles to prop up its currency from a 32-year-low against the dollar, largely blamed on diverging yields between the United States and Japan.
Of the 29 economists who responded to the question of what posed the greatest risk to Japan's economy in the coming year, 17, or 59 per cent, chose longer-than-expected rate hikes by the Federal Reserve, the Oct 11-20 survey showed.
The Fed's aggressive rate action would prolong and deepen the US recession, which would spill over to the global economy and in turn hit Japanese exports, said Harumi Taguchi, principal economist at S&P Global Market Intelligence.
"It could also cause worrying repercussions on (Japan's) corporate spending and wages as firms are finding it more difficult to transfer rising cost burdens stemming from the yen's sharp decline," she added.
Policymakers worldwide, including the International Monetary Fund, have cut global growth projections for 2023, citing elevated prices and higher cost of borrowing.
In the October Reuters poll question, which allowed up to two choices as the largest risks to Japan's economy, 15 respondents selected "a slowdown in US and European economic growth" while 11 picked the equivalent for China, Japan's biggest trade partner.
The biggest risk to Japan's economy over the next year is a prolonged period of US monetary tightening, although the world's third-largest economy is unlikely to sink into a recession, the majority of economists polled by Reuters said.
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Tuesday's (Oct 25) survey result came as Japan struggles to prop up its currency from a 32-year-low against the dollar, largely blamed on diverging yields between the United States and Japan.
Of the 29 economists who responded to the question of what posed the greatest risk to Japan's economy in the coming year, 17, or 59 per cent, chose longer-than-expected rate hikes by the Federal Reserve, the Oct 11-20 survey showed.
The Fed's aggressive rate action would prolong and deepen the US recession, which would spill over to the global economy and in turn hit Japanese exports, said Harumi Taguchi, principal economist at S&P Global Market Intelligence.
"It could also cause worrying repercussions on (Japan's) corporate spending and wages as firms are finding it more difficult to transfer rising cost burdens stemming from the yen's sharp decline," she added.
Policymakers worldwide, including the International Monetary Fund, have cut global growth projections for 2023, citing elevated prices and higher cost of borrowing.
In the October Reuters poll question, which allowed up to two choices as the largest risks to Japan's economy, 15 respondents selected "a slowdown in US and European economic growth" while 11 picked the equivalent for China, Japan's biggest trade partner.