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World Bank upgrades Japan's growth forecast to 0.9% in 2019

WASHINGTON (Kyodo) -- The World Bank on Tuesday forecast Japan's economic growth for this year at 0.9 percent, up 0.1 percentage point from its estimate last June.

Global growth, however, was forecast to be down 0.1 point to 2.9 percent as the tariff war between the United States and China has led to slowing trade and manufacturing activity, the Washington-based institution said in its semiannual Global Economic Prospects report.

U.S. growth was unchanged from the June estimate at 2.5 percent, while China's growth rate was down 0.1 point to 6.2 percent.

Japan's upward projection reflects a recovery from contractions in the first and third quarters of 2018 due to bad weather and natural disasters, according to the report.

The Bank of Japan is providing an "exceptionally supportive" monetary policy by keeping long-term interest rates near zero and expanding its balance sheet, it said.

"As employment growth slows and fiscal policy tightens, growth is expected to moderate to 0.7 percent in 2020 and 0.6 percent in 2021," it said.

The 2020 figure was up 0.2 point from the previous forecast.

The world economy is projected to expand 2.8 percent in 2020, down 0.1 point amid rising downside risks to the outlook.

"The possibility of escalating trade restrictions involving major economies remains elevated," the report said, in an apparent reference to the imposition by Washington and Beijing of tit-for-tat tariffs on each other's imports.

New tariffs introduced since the beginning of last year have affected about 12 percent of U.S. goods imports, 6.5 percent of Chinese goods imports and about 2.5 percent of global goods trade, it said.

"This uncertainty is likely to weigh on firms' willingness to invest, export and engage in international value chains, with negative effects on the global trade outlook," it said.

In reflection of such sentiments, growth in trade of goods and services across the world was down 0.6 point from the June forecast to 3.6 percent in 2019 and 0.5 point to 3.5 percent in 2020, according to the report.

The U.S. economy is projected to increase 1.7 percent in 2020, down 0.3 point, before sliding further to 1.6 percent in 2021.

"During the forecast horizon, growth is expected to decelerate as monetary policy accommodation is removed, and as fiscal stimulus fades and subsequently begins to drag on growth," the report said.

"Higher trade tariffs are expected to further weigh on activity, especially exports and investment."

The Chinese economy is likely to expand 6.2 percent in 2020, unchanged from the June forecast, before dropping to 6.0 percent in 2021.

"Domestic demand is projected to remain robust aided by policies to boost consumption," the report said. "Supportive fiscal and monetary policies undertaken so far are expected to largely offset the negative impact of higher tariffs."

The eurozone economy is projected to grow 1.6 percent in 2019, down 0.1 point, and 1.5 percent in 2020, unchanged, as monetary stimulus is withdrawn and global trade growth moderates.

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