Reference News, July 17 report - According to the "Nikkei Business Publications" on July 15, Japan's economy is at a crossroads of whether it will fall into a recession. US President Trump announced that from August 1, tariffs of 25% will be imposed on Japanese products. If Japanese exports are negatively affected, equipment investment will be restrained, and wage increase trends will also slow down. Previously, Japan's economy was slowly and continuously recovering, and the next period will be a critical moment.

"In principle, having production bases in the United States is the best solution. If affected by tariffs, even popular products will not be sold." said the president of Kibishi, a leading Japanese confectionery company, Miyamoto Shuji, who has been expanding the US market. The company previously exported animal-shaped cookies from Asia to the US, and will now consider producing locally in the US.

Kameido Seika will also use its subsidiary TH Foods (located in Illinois, USA) as a base to promote local confectionery production in the US.

The high tariffs have raised concerns about their impact on Japan's domestic manufacturing industry, and the economic situation is filled with an atmosphere of uncertainty. The May business sentiment index, which reflects short-term economic movements, shows weak exports, with the degree of deterioration being second only to July 2020. According to the data definition, Japan's economy is likely currently in a recession state.

Uncertain economic prospects make companies hesitant to expand production. A survey conducted by the Ministry of Finance and the Cabinet Office on corporate business sentiment forecasts showed that the overall confidence index for large Japanese companies in the second quarter was -1.9, marking the first negative value in five quarters.

"We are setting up our business based on the long-term situation of additional tariffs." said Sasaki Hiroyuki, president of Ogino Kogyo Co., Ltd., which develops engine and transmission-related components. He faces daily anxiety over the policies of the Trump administration in the US. The company's transactions with Mazda, a company greatly affected by tariffs, account for 70% of its domestic sales. Ogino Kogyo's consolidated sales exceeded 2 billion yen (about 135 million USD) for the first time last year, but it is expected to decrease this year. Non-urgent investment plans such as factory building renovations will be postponed.

Hirosaki Prefecture's Governor, Yonemura Hidetaka, pointed out on the 8th that Trump's tariff measures would "impact sales and funds, including suppliers." Transferring production bases overseas may lower employment and wage levels.

Japanese economic indicators are not all deteriorating. The June business observer survey showed good summer commodity consumption, which rose for two consecutive months. According to the Bank of Japan's short-term survey, equipment investment this year will grow by 6.7% across all sizes and industries, maintaining stability.

Currently, Trump's tariff measures have not caused an economic downturn as severe as the Lehman crisis.

The Organisation for Economic Co-operation and Development (OECD) released an economic outlook report in June, predicting that the US economic growth rate will be 1.6% in 2025 and 1.5% in 2026. Although it is lower than the 2.8% in 2024, it is still higher than Europe and Japan. The US unemployment rate is currently low, at 4.1% in June, and the inflation rate in May was 2.4%, with no signs of a sharp slowdown in personal consumption. The world economy still depends on the US.

Germany, the largest economy in Europe, has had negative growth for two consecutive years up to 2024. If Germany's exports to the US worsen and it also records negative growth in 2025, it will be the first time since the unification of East and West Germany that it has experienced three consecutive years of negative growth.

In the first Trump administration, international tensions escalated, causing global economic stagnation. In November 2018, Japan's economic growth was weak. According to Takahiro Nagahama of the Dai-Ichi Life Economic Research Institute, the current economic situation is similar to that time, "at a crossroads of prosperity." (Translated by Liu Jieqiu)

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