Japan govt: economy picking up but job market tougher

Tue Sep 8, 2009 5:27am EDT

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TOKYO, Sept 8 (Reuters) - Japan's economy is showing signs of picking up but a record jobless rate obscures its near-term prospects, the government said in a monthly report on Tuesday, as it left its overall assessment of the economy unchanged.

The economy is expected to pick up as companies finish adjusting inventories and effects of government stimulus take hold and overseas economies improve, the Cabinet Office said in the report.

But due to the worsening employment situation the economy is likely to remain in a severe state for the time being, it said, the citing a rise in the jobless rate to a record high of 5.7 percent in July. [ID:nTKC003448]

"The rising jobless rate may exert downward pressure on wages in the future and is a risk factor for the economy," an official of the Cabinet Office told reporters at a briefing.

It said fears remain that unemployment will worsen due to an extremely low level of production.

Overall, the government left assessment of the economy unchanged, with the deteriorating job situation offsetting improvements in capital spending and corporate profits.

It upgraded its assessment of corporate profits and capital spending as the pace of deterioration in them has moderated.

On personal consumption and exports, the government acknowledges there are downside risks, with their recent upturns having been supported almost solely by government stimulus worldwide for spurring purchases of low-emission vehicles, the official said.

Japan's revised gross domestic product (GDP) figures for April-June, to be released on Friday, are expected to confirm that the economy emerged from its worst recession since World War Two, but analysts regard the recovery as fragile since much of it depends on one-off stimulus steps. [ID:nT314465] (Reporting by Rie Ishiguro)

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