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Business Insight

Economic Outlook: US

This installment of the five-part Newsline series on the economic outlook for major markets focuses on the biggest economy in the world, the US. Last year the Federal Reserve raised the key lending rate for the first time in nearly a decade on the back of a recovering economy.

NHK WORLD's Ai Uchida spoke to University of Tokyo Professor Motoshige Itoh about what he's expecting this year. He specializes in international economics and is a policy advisor to Japanese Prime Minister Shinzo Abe in compiling the country's growth strategy. Itoh says the US economy is in the process of recovering and should grow at about the same rate as last year, roughly 2.5 percent.

Itoh: In a sense United States is the only economy which is recovering very quickly. I think the low price of oil and energy is a very good factor for supporting economic recovery. Also, there is very rapidly emerging new type of technology, such as information of things or artificial intelligence and cloud computing and so on. This will provide a lot of opportunity for new firms coming to the new business areas. So these are probably important supporting factors for the recovery of the economy.

Uchida: Is the economy in the US really that good?

Itoh: The problem is they are still restrictive at what they call the secular stagnation, which means just the general trend of economic recovery very slow. Employment is good, but not dramatically improving, and we still have some stagnant wage conditions for poor people. We are facing some kind of international risk, I mean, probably the international economy in 2016 will be better than the economy in 2015, but still the developing country such as China or other emerging countries are still in the process of adjustment, so we cannot expect much of the export expansion to these regions, and European economy is still facing many difficult problems. So the rest of the world is actually having some minor influence on the economy. I am very cautiously optimistic about the American economy this year.

Uchida: Many are expecting a lack of political direction this year as Americans vote for a new president in the fall. What will dictate the tone of the economy?

Itoh: There's not much that the government side can do at this moment. That is the reason why I said the monetary policy of Federal Reserve should be very cautious. We may have something like a three or four times increase in 2016, which means just plus interest rate will reach probably slightly below 2 percent. What we call the balance sheet position of the Federal Reserve will not be shrinking very quickly, because they have to be very careful about the market condition. And, watching the pace of the recovery of the economy may be very essential.

The next installment of "World Economic Outlook 2016" will focus on Europe.

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