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Investing.com - Japan’s government will mull a possible cut to its economic growth forecast for the fiscal year ending in March 2026 due to the potential impact of sweeping U.S. tariffs, Reuters reported on Wednesday.
Citing sources close to the matter, the news agency reported that Japan’s current outlook for growth of 1.2% may be reduced to below 1%.
The government is due to finalize its predictions around the end of July, as Japan assess the effects of the U.S. levies, Reuters added.
The report comes as Japan is looking to secure a fresh trade deal with Washington prior to the expiration of a delay to President Donald Trump’s punishing "reciprocal" duties early next month. Local media in Japan have suggested that the country’s tariff negotiator Ryosei Akazawa is putting together a visit to the U.S. as early as June 26, after Prime Minister Shigeru Ishiba and U.S. President Donald Trump agreed to continue with discussions following a recent meeting in Canada.
However, no trade deal has yet to be secured and Akazawa has flagged that talks with the U.S. remain "in a fog." Should the reciprocal tariffs take effect in July, Japan would face a 24% tariffs, as well as a 25% levy on Japanese-made cars.
Reports have said that an anticipated upper house election on July 20 could complicate further the negotiations for Ishiba, especially around his ability to bend on contentious issues like agriculture imports.
Japan’s government typically unveils two economic projections a year, with one coming around the summer that can be used as a basis for drafting state budgets in the following fiscal year.
An economic growth cut would come after the Bank of Japan slashed its own outlook for the country’s annual expansion to 0.5% from 1.1%, largely because of murkiness surrounding U.S. tariffs.
Recent data has suggested that the duties are already beginning to take their toll on Japan’s economy. Exports dropped in May for the first time in eight months, with major carmakers like Toyota (NYSE:TM) particularly feeling the hit from the tariffs.