SINGAPORE – The Asian Development Bank on Friday lowered its projection for Japan’s economic growth this year to 1.7 percent from the 2.3 percent it forecast in October, citing bilateral tensions with China as one of the factors.
“Going forward, zero growth is projected in the fourth quarter, partly due to the impact on Japan’s exports of recent tensions with the PRC,” the Manila-based bank said in its “Asian Development Outlook Supplement,” referring to China’s official name, the People’s Republic of China.
“This implies annual growth of only 1.7 percent for 2012,” the ADB said, adding, “this weakness is forecast to continue through 2013, with the economy expanding by an anemic 1.6 percent.”
The bank said considerable internal and external downside risks continue to hover over the outlook for Japanese gross domestic product.
It said Japan’s recovery from the March 2011 earthquake and tsunami has been slow and, despite several government measures to mitigate the impact, reconstruction has been “weaker and slower than expected.”
The challenge of replacing Japan’s nuclear power capacity and the relatively high prices Japan pays for imported liquefied natural gas compared with the United States and Europe “damages the country’s competitiveness and slows domestic activity.”
Another negative factor is that the yen remains overvalued, it added.
Although the Asian Development Outlook report series focuses more on developing economies, the Supplement also mentioned major economies whose performances have a big impact on the region.
On the whole, the bank said, growth in the developing part of Asia is cooling compared with last year’s 7.2 percent. It also lowered its growth forecast for the region this year to 6 percent from the 6.1 percent projected in October.
The ADB cited, among other factors, slower-than-expected growth for India and a continued slowdown in other East Asia economies except China, which has recently been showing signs of bouncing back from a soft patch and should be able to expand as earlier forecast at 7.7 percent this year and 8.1 percent in 2013.