TOKYO (MNI) – The Japanese government on Monday left its economic assessment for August unchanged from the previous month, repeating that the domestic economy is “in a moderate recovery,” with the growth rate expected to slow down after a surge in the second quarter.
The government also left unchanged its assessment of consumption, capital investment, exports and industrial production while upgrading its view on public investment for the first time in two months as the effect of last fiscal year’s supplementary budget has emerged.
In June, the government revised up its overall economic assessment for the first time in six months.
Looking ahead, the government maintained its outlook that the economy will continue recovering moderately, backed by improvement of labor and income conditions and the effects of fiscal spending.
The government also repeated the risks to its outlook, citing uncertainty in overseas economies and the effects of fluctuations in financial and capital markets.
“The North Korean nuclear threat is different from other risks that have actually materialized, such as Brexit,” Hideyuki Ibaragi, director of macro-economic analysis at the Cabinet Office, told reporters.
“However, since tensions have been heightened, we have to watch the impact on financial markets.”
The government repeated that private consumption is “picking up moderately” and that capital investment is “recovering.”
“Total employee compensation has been growing thanks to an increase in the number of employees. Private consumption rose sharply in the April-June quarter, but if you even it out, it is increasing moderately,” Ibaragi said.
“The long stretch of rainy days in August may have been a damper but excluding its effect, and considering the recent improvement in wage income of employees and consumer confidence, the increase in private consumption is expected to continue for now.”
But Ibaragi said the government is being cautious about the outlook for consumer spending as wage hikes remain slow.
“We are not embracing the current situation with open arms. We have to watch if it will be sustainable,” he said.
The Cabinet Office’s Private Consumption Integrated Estimates index, which is based on both supply- and demand-side data, posted the third straight quarterly increase in April-June, up 0.9% on the quarter after rising 0.5% in January-March.
The Economy Watchers Survey showed that sentiment about Japan’s current economic climate posted the first month-on-month drop in four months in July, down 0.3 point at 49.7 on a seasonally adjusted basis, after rising sharply by 1.4 points in June, but the level remained relatively high in the current recovery phase.
The slight drop in sentiment reflects the adverse effects of chronic labor shortages and weather factors. Heavy rainfalls and flooding in southern Japan in early July caused casualties and significant damage while heat waves made consumers wary of buying fresh food for fear of food poisoning. On the other hand, high temperatures boosted demand for air conditioners.
The government also left unchanged its assessment of exports and industrial production, the key drivers for current modest economic growth, saying they are both “pickup up.”
Industrial production rose a seasonally adjusted 2.2% from the previous month in June, the first rise in two months, after falling 3.6% in May. The median forecast by economists polled by MNI showed factory output would slip 0.4% on month in July.
Export volumes fell 0.4% on month in July, the second straight month-on-month drop, after declining 0.6% in June. But Ibaragi noted that export volumes to Asia rose 0.7% in July, showing demand is picking up after a temporary dip.
The average economist forecast for Q3 GDP growth is an annualized 1.44% rise, down from the projected 2.24% expansion in Q2, according to the latest monthly ESP Forecast Survey of 42 economists by the Japan Center for Economic Research conducted from July 25 to Aug. 1. The survey showed economists projected a gradual slowdown in the GDP growth rate toward 1% from Q3 onward.
Japan’s economy for the April-June quarter posted stronger-than-expected growth of 1.0% on quarter, or an annualized 4.0%, as strong domestic demand — led by consumption, business investment and public investment — offset what is seen as a temporary slip in external demand.
MONDAY, AUGUST 28, 2017 – 02:14