Japan downgrades view on global economy as US tariffs bite

By Leika Kihara

TOKYO (Reuters) -Japan's government on Thursday downgraded its assessment on the global economy in the face of uncertainty over U.S. trade policy, signalling its alarm over the broadening fallout from President Donald Trump's tariffs.

In its monthly economic report for May, the government also revised down its assessment for the U.S. economy for the first time in nearly three years to say its expansion was moderating.

"A pick-up in the global economy is moderating with growth stalling in some regions amid uncertainty over U.S. trade policy," the report said. In April, the government said global economic growth was picking up.

The government maintained its assessment on Japan's economy, saying it is "recovering moderately, while uncertainty exists over U.S. trade policy."

While rising jobs and household income will underpin a moderate recovery in Japan's economy, downside risks from U.S. tariffs are increasing, the report said.

"The effects of continued price rises on household sentiment and consumption are also downside risks to Japan's economy," it said, adding the fallout from market fluctuations also warranted attention.

The International Monetary Fund slashed its global growth forecasts by 0.5 percentage point to 2.8% for 2025 in its World Economic Outlook report released on April 22, citing the impact of sweeping tariffs imposed by the Trump administration.

While the United States and China agreed on a temporary truce in their trade war, uncertainty over Washington's trade policy has disrupted supply chains, weighed on global demand and prompted firms to put off investment plans.

Japan's economy shrank an annualised 0.7% in the first quarter for its first contraction in a year and exports to the U.S. slumped in April, highlighting the toll U.S. tariffs is taking on its fragile recovery.

(Reporting by Leika KiharaEditing by Shri Navaratnam)

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