Japan's government warned of uncertainty over the impact of US trade policies as tariffs could hurt the global economy but it also said in a monthly report on Friday that the domestic economy was recovering moderately thanks to a solid corporate sector.
Tokyo also said the downside risks to its economic outlook were growing due to US President Donald Trump's tariffs and it warned of the impact of market volatility.
President Trump touted "big progress" in tariff talks with Japan on Wednesday, although it was only the one of the first rounds of face-to-face talks since he announced a barrage of duties on global imports, rocking markets and stoking recession fears. The two nations plan to hold a second meeting later this month.
"The economy is recovering moderately, while uncertainty is arising from US trade policies," Japan's Cabinet Office said in its monthly report for April, issued on Friday.
The government expects the economy to continue recovering but higher US tariffs could impact Japan via trade and market turmoil, it said.
"It is necessary to be more vigilant than before about the impact on the domestic and international economies," an official at the Cabinet Office said.
While consumer sentiment was weakening due to higher inflation - notably for daily necessities such as food, private consumption, which accounts for more than half of the economy, showed signs of picking up, the report said.
The government cut its view of corporate sentiment for the first time since March 2022, saying it was "almost flat" after a Bank of Japan survey showed big manufacturers' business sentiment worsened to a one-year low in the three months to March.
