Japanese Government Adjusts Corporate Profit Outlook Amid Economic Recovery Claims

Forex - The Japanese government stated that the economy showed a moderate recovery in December; however, it warned about upcoming risks such as high interest rates abroad and policies in the United States. For the first time since March 2023, the government downgraded its assessment of corporate profits. In its monthly report, the Cabinet Office said, “While the economy appears to be somewhat stagnant, it is recovering moderately.” The government expects the mild recovery to continue due to improving employment and income conditions, but it maintains a cautious outlook on U.S. policies since President Donald Trump's commitment to new tariffs on goods from Canada, Mexico, and China threatens global trade. The government also indicated that high interest rates in the U.S. and Europe, as well as the stagnant real estate market in China, could harm the Japanese economy. In its report, the government reiterated that private consumption, which makes up more than half of the Japanese economy, has "increased," supported by a recovery in wages. It also stated that capital expenditures have "recovered" and that exports have remained "almost flat," echoing its assessment from the previous month.