Japan’s economy is primed to stall in 2020 as it continues its sluggish growth at the end of the year, according to the International Monetary Fund (IMF).
The IMF cut Japan’s growth forecast once again this year from 0.9 percent to 0.8 percent.
“Real GDP growth is projected to be above potential at 0.8 percent in 2019,” stated an IMF report released on Monday.
The IMF also advised Bank of Japan to adjust interest rates in-line with other Asian central banks that are reacting to the global economic slowdown and the ramifications of the US-China trade war hitting the Asian region hard.
“The monetary policy stance has been largely unchanged since 2016 but pressure is rising to provide more stimulus in line with other major central banks,” stated the IMF report.
“Fiscal policy should be supportive to protect near-term growth and promote inflation momentum,” added IMF Managing Director Kristalina Georgieva at a press conference in Tokyo today.
The third largest economy in the world started to lose steam in the third quarter with 0.2 percent GDP growth rate, according to Japanese government data.
Additionally, a trade war with South Korea has most Koreans boycotting all Japanese goods and services. Economic, political and cultural relations between the two Asian economic giants have reached a historical low.
South Koreans have boycotted all things “Made in Japan” since Japan slapped export restrictions on key materials needed in South Korea’s tech manufacturing supply chain — a move economists characterized as “weaponizing trade.”
The IMF advised Japan to de-escalate current trade tensions as to minimize the negative effects onto the Japanese economy that further disrupt global value chains.
“Ongoing global trade tensions and any further escalation could reduce Japan’s net exports, investment, and growth—including from direct and indirect effects via global value chains and adverse spillovers to Japan’s financial sector,” advised the IMF.