TOKYO: In a recent statement, Japan's government expressed its concerns regarding the potential consequences of evolving U.S. trade policies, particularly the tariffs imposed by President Donald Trump. These tariffs are expected to adversely affect the global economy. However, the government also highlighted a silver lining in its monthly report released on Friday, indicating that the domestic economy has been recovering at a moderate pace, largely driven by a robust corporate sector.

The Japanese government acknowledged that while the economy shows signs of recovery, the uncertainty surrounding U.S. trade policies poses significant risks. In this context, the Cabinet Office noted that the downside risks to Japan's economic outlook are indeed increasing due to the tariffs imposed by the United States. Furthermore, they warned of potential market volatility that could arise as a result.

In a related development, President Trump recently claimed that significant progress had been made in tariff negotiations with Japan during talks held on Wednesday. This marked one of the first face-to-face discussions since the announcement of the extensive tariffs on global imports, which have shaken markets and heightened fears of a potential recession. To build on this dialogue, both nations plan to convene for a second meeting later this month, emphasizing the importance of these discussions for economic stability.

According to Japan's Cabinet Office, the economy is indeed on a moderate recovery path, but it remains crucial to remain alert to the impacts of U.S. trade policies. An official from the Cabinet Office stated, "It is necessary to be more vigilant than before about the impact on the domestic and international economies," underscoring the interconnected nature of global trade and economic health.

Despite the overall recovery, consumer sentiment in Japan has been faltering due to rising inflation, particularly concerning essential items such as food. However, the report also noted a positive trend in private consumption, which is a critical component of the economy as it constitutes more than half of Japan's total economic activity. This indicates that while inflation is a pressing concern, there are indications that consumers are beginning to spend more, contributing to economic growth.

In another notable observation, the government has revised its outlook on corporate sentiment for the first time since March 2022. The report stated that corporate sentiment is now regarded as "almost flat" following a survey conducted by the Bank of Japan, which revealed that business sentiment among large manufacturers has deteriorated to its lowest level in a year during the quarter ending in March. This decline reflects the challenges faced by corporations in light of external pressures and market conditions.