FxWirePro: Key risks facing Japan in 2019

As 2018 comes to an end, Japan and its economy are facing several key risks heading into 2019. Let’s have a look at those key factors,

• One of the major risks facing Japan in 2019 is monetary policies pursued by the Bank of Japan (BoJ). As Bank of Japan (BoJ) still continuing its record easing with a promise to continue until 2 percent inflation is reached, managing it and more importantly exiting it becomes very tricky, as lower energy prices make it difficult for the BoJ to reach the inflation target. In November 2018, Japan’s central bank has become the first among G7 nations to own assets collectively worth more than the country’s entire economy, following a half-decade spending spree designed to accelerate weak price growth.
   
• Another major set of risks are policies of the United States. Trade war by the Trump administration, which has already canceled participation in the Trans-Pacific Partnership trade deal that would have been very beneficial to Japan. The Trump administration is also reducing the United States’ global military presence, which is likely to cost Japan more in 2019 as it would have to increase its own defense spending.
   
• Weaker growth would also affect Japan in 2019, more so, should the U.S. economy slow down significantly. Despite record monetary easing by the central bank, Japan’s GDP growth in the third quarter of 2018 was zero compared to a year ago.
   
• The major geopolitical risks facing Japan is China’s influence in the region, which we expect to simmer through 2019 rather than full throttle.