Japan Cabinet Office lowered fiscal 2018 and 2019 growth forecast notably in the new economic projections. The move was due to impact from natural disaster as well as increasing downside risks from US-China trade war. Inflation forecasts was also revised lower. Though, private consumption is expected to pick up down the road, providing a bright spot.

For fiscal 2018, which ends in March, growth is now expected to grow 0.9%, sharply lower from prior projection of 1.5%. For fiscal 2019, growth is projected to be at 1.3%, also down from prior projection of 1.5%.

On inflation, core CPI is projected to rise 1.0% in fiscal 2018, revised down from prior forecast of 1.1%. For fiscal 2019, core CPI is expected to climb slightly to 1.1%, also revised down from prior estimate of 1.5%.

In other projections, capital expenditure is forecast to rise 3.6% in fiscal 2018, then slow to 2.7% in fiscal 2019. Private consumption is expected to rise 0.7% in fiscal 2018 and accelerate to 1.2% in fiscal 2019.

Japan PMI manufacturing was finalized at 52.3, revised up from 51.6. But the reading was still the lowest in 11 months.

Commenting on the Japanese Manufacturing PMI survey data, Joe Hayes, Economist at IHS Markit, which compiles the survey, said:

“Latest survey data signalled a slowdown to manufacturing sector growth at the beginning of Q3. Output growth eased and there was a noticeable softening of demand, while export sales failed to record any upswing for a second month running.

“There was also evidence that supply-side constraints were beginning to bite harder. Employment growth slipped and was weaker than rates seen earlier in the year, meanwhile delivery times for inputs lengthened to the greatest extent in over seven years.

“In turn, input price inflation accelerated to an 88-month high, resulting in the strongest rate of increase in selling charges for almost a decade. Although stronger output price inflationary pressures will be welcomed by policymakers, anecdotal evidence indicates the latest rise was primarily cost-push. Further weakness in total new business growth could skew the inflationary outlook to the downside.”

Full release here.

In its latest monthly economic report, Japan Cabinet Office has lifted its assessment on exports for the first time since May. Exports, which previously displayed a “steady undertone,” are now characterized as showing “movements of picking up recently.”

Other key areas of the economy showed stable and positive trend. Private consumption and business investment are both on an “picking up”. Corporate profits have seen moderate improvement. Employment situation shows movements of improvement. Consumer prices are rising.

Looking ahead, the report expects the Japanese economy to sustain its moderate recovery, driven by enhancements in employment and income situations. However, it does underscore potential threats. The slowing pace of foreign economies, especially due to global monetary tightening and uncertainties about China’s economic direction, are identified as primary external risks to Japan’s growth trajectory.