TOKYO (Reuters) – Bank of Japan Governor Kazuo Ueda said the pace of economic activity in China has been a disappointment that could cloud Japan’s economic outlook, according to a text of his speech delivered at the weekend Jackson Hole Symposium.
China’s July data, such as retail sales, business investment and industrial production were “on the weak side,” Ueda said, according to the text posted on the BOJ’s website on Monday.
“The underlying problem appears to be the adjustment in the property sector and its spillover to the rest of the economy,” Ueda said on China, adding that the hit to Japan from China’s weakness has been somewhat offset by the relative strength of the U.S. economy.
Ueda also said trade and foreign investment flows suggest Japanese firms are diversifying production from China into the rest of Asia and the United States, partly in response to geopolitical risks.
“Longer run effects of geopolitical factors on the Japanese economy are unsurprisingly very uncertain,” Ueda said, adding that “the tit-for tat war,” mainly in the semiconductor sector, between major advanced economies and China was a risk.
“Central banks will have a hard time factoring in these forces when making policy decisions,” he added.
Ueda delivered the speech during a session on globalisation held on Saturday at the Jackson Hole Symposium in Wyoming.
Geopolitical tension between the United States and China has been among the risks to global trade that have weighed on export-reliant economies such as Japan.
Relations with China soured after Japan started releasing treated radioactive water from the wrecked Fukushima nuclear power plant into the Pacific Ocean on Thursday, drawing expressions of concern from neighbouring countries.
(Reporting by Leika Kihara; editing by Barbara Lewis)