The ongoing American government shutdown has cut off important economic information that officials in Japan and other nations depend on when making decisions about their own financial policies, creating worry among leaders worldwide.
Countries around the globe keep a close watch on the American economy because what takes place there affects their own situations. Without access to regular updates from the United States, foreign policymakers say their jobs become harder and the chance of making wrong choices goes up during a period when nations are already dealing with changes brought by the Trump White House’s new approach to international commerce.
“It’s a serious problem. We hope this gets fixed soon,” Kazuo Ueda, who runs Japan’s central bank, said at a press conference on October 3. He talked about the difficulties his institution faces when trying to figure out the right time to raise borrowing costs.
A different Japanese official, speaking to Reuters anonymously due to restrictions on public commentary, offered a more direct critique. The official expressed skepticism about the situation, questioning Federal Reserve Chair Jerome Powell’s repeated assertions that Fed policy decisions are driven by economic data, arguing that reliable data to base such decisions on is actually lacking
British policymaker warns of ‘termites’ eating dollar’s status
Catherine Mann, who helps set policy at England’s central bank, explained that questions about American information don’t affect British decisions as directly as shifts in commerce policy do. Those changes have a direct impact on costs and what the country sells abroad. However, she pointed out how Britain’s currency lost its top position in the world over many years.
She compared policy changes that might hurt the dollar’s standing or weaken the Fed’s freedom to “termites” that slowly damage something over time. These issues “are things that we have in our mind but they’re not front and center,” Mann said.
Leaders from finance ministries and economic agencies worldwide gathered in Washington this week for the World Bank and International Monetary Fund meetings.
With ongoing war in Europe, trouble in the Middle East, and long-term challenges like climate change, much of the discussion centers on President Donald Trump’s global plans, how he’s performed so far, and the sudden halt of official information about a $30 trillion economy that makes up roughly one-fourth of what the world produces.
Shutdown symptoms point to deeper problems
The shutdown might end anytime and information could start flowing again. But the situation shows deeper problems with American governance and whether data can be trusted. Trump has tried to gain more control over the Federal Reserve and removed the head of the Bureau of Labor Statistics after getting angry about a jobs report.
The IMF listed this among the “downside risks” the world faces right now.
The IMF’s World Economic Outlook, published Tuesday, cautioned that growing political interference with policy institutions threatens to undermine the public credibility they have worked hard to establish in carrying out their responsibilities.
The report further noted that when agencies responsible for gathering statistical information face such pressure, it risks damaging both public and market confidence in government-provided data. This would make the work of central banks and other policymakers considerably more difficult when formulating policy.
Additionally, if political meddling compromises the accuracy, dependability, and promptness of data, the chances of flawed policy decisions increase substantially.
Not everything has gone dark. The Federal Reserve, which pays for itself and isn’t touched by the shutdown, keeps surveying its wide network of contacts. Private services offer alternatives that officials have learned to piece together, though these aren’t perfect.
The IMF cut its global growth forecast by half a percentage point to 2.8% in April. In Tuesday’s update, the fund revised this to 3.2% for the year. The report found “a significant, though not massive, impact of shifting policies on the economic outlook.”
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