November 22, 2018 / 8:58 AM / 19 days ago

Japan sees signs of weakness signs in Asia, keeps rosy view of own economy

TOKYO (Reuters) - Japan’s government pointed on Thursday to signs of increasing weakness in some Asian economies as escalating trade frictions cloud the region’s growth outlook, but affirmed its view that Japan’s economy was recovering moderately.

FILE PHOTO: A cargo ship is pictured at an industrial port in Tokyo, Japan, August 18, 2016. REUTERS/Kim Kyung-Hoon/File Photo

In a monthly report issued on Thursday, the government kept intact its assessment that a tight job market and rising wages were keeping the economy on track for a moderate recovery.

But it repeated last month’s warning of lingering overseas challenges to Japan’s growth such as heightening global uncertainties, volatile financial markets and escalating trade friction.

“The economy is expected to continue recovering ... But attention should be given to risks,” including the effect of trade tensions and market fluctuations, the government said.

The government offered gloomier assessments on South Korea and Thailand than last month, warning that there were “some weaknesses” in their recovery.

Some Asian semi-conductor makers had deferred capital expenditure as they saw demand reaching its peak, in turn undermining Japanese exports of chip-making equipment, a government official told a briefing.

“Some capital expenditure plans are being put off. This reflects weak demand rather than the direct impact of trade frictions,” said Hideyuki Ibaragi, director of macroeconomic analysis at the Cabinet Office.

“But if the trade war persists, capital expenditure could weaken further,” he said.

The warning underscores the government’s concern that slowing Asian growth could hit Japan’s export-reliant economy and make any rebound from a contraction in July-September weaker than initially expected.

The Organization for Economic Cooperation and Development (OECD) slashed its global growth forecast, pointing to risks such as trade tensions and higher interest rates.

Japan’s economy shrank more than expected in the third quarter, hit by natural disasters and a decline in exports, seen as a sign that trade protectionism is starting to take its toll on overseas demand.

Reporting by Leika Kihara, editing by Eric Meijer

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