* Some parts of economy showing signs of bottoming out -
* Govt view on private consumption upgraded for two straight
* Govt expects BOJ to take bold steps to achieve 2 pct
(Adds analyst comments, details, background)
By Kiyoshi Takenaka
TOKYO, Jan 23 Japan raised its view of the
economy for the first time in eight months on Wednesday as
private consumption held firm and business sentiment improved,
in a sign that Prime Minister Shinzo Abe's policy of easy money
and big spending, dubbed "Abenomics", has begun taking effect.
Improvement in exports and recently compiled economic
stimulus steps will likely put the economy back on a recovery
path, but a slowdown in overseas economies remains a risk
factor, the government said in its monthly economic report.
Abe, who led his Liberal Democratic Party to a landslide
election victory in December, has called for aggressive monetary
easing and heavy fiscal spending to beat persistent deflation,
helping to drive down the yen and boosting share prices
The government also said it expects the Bank of Japan (BOJ)
to take bold steps to meet a 2 percent inflation goal that the
government agreed with the central bank on Tuesday as part of a
bold push to escape nagging deflation and to revive the economy.
"The economy is weak, but signs of bottoming out can be seen
in some areas," the report said.
That marked an upgrade from last month, when the government
said the outlook was weakening due to a slowdown in overseas
Abe's cabinet approved a 10.3 trillion yen ($116.3 billion)
stimulus package this month, while the BOJ, in its most
determined effort yet to end years of economic stagnation, on
Tuesday decided to switch to an open-ended commitment to buying
assets next year and double its inflation target to 2 percent.
"(The government) expects the Bank of Japan to promote bold
monetary easing so that the price stability target will be
achieved as soon as possible," the monthly report said.
Japanese economics minister Akira Amari, talking to
reporters after the approval of the report by the cabinet, said
the improved outlook reflected the positive impact a softer yen
and firmer stock prices were exerting on corporate sentiment.
Hiroaki Muto, senior economist at Sumitomo Mitsui Asset
"The yen has depreciated by about 10 percent (against the
dollar) thanks to "Abenomics", and expectations (for economic
recovery) are running high," Muto said.
"Higher expectations aside, the yen's softer trend will have
an impact on the real economy. That's a major factor behind the
SOLID CONSUMER SPENDING
In the monthly report, the government raised its view on
private consumption for the second month in a row, saying
consumer spending is holding firm.
"Auto sales bottomed in October and were on the rise in
November and December. Car production is recovering as well.
Private consumption is showing signs of bottoming out," a
Cabinet Office official in charge of compiling the report said.
"Corporate leaders' views on business conditions are
recovering against the backdrop of a recent correction to the
yen's appreciation and gains in share prices," he said.
The risk of overseas developments negatively affecting the
Japanese economy has diminished, he added, as the U.S.
government has averted triggering automatic spending cuts and
tax hikes known as the "fiscal cliff", and Japan appeared to be
past the worst of its diplomatic row with China.
Sino-Japanese relations deteriorated sharply after the
Japanese government in September bought disputed East China Sea
islets, known as the Senkaku in Japan and the Diaoyu in China,
from a private Japanese owner, triggering violent protests
across China and a boycott of Japanese goods.
Although Asia's two biggest economies are still sending
patrol ships to waters near the islands, raising worries that an
unintended collision could escalate into a broader clash,
anti-Japanese demonstrations have subsided.
Japanese automakers including Toyota Motor Corp and
Nissan Motor Co Ltd saw a slow recovery of sales in
China in December as the bruising effects of the territorial
To keep the recovery trend going, analysts said,the
government needs to tackle such tasks as deregulation and
possible participation in the U.S.-led Trans-Pacific Partnership
(TPP) free trade pact.
Businesses want Japan to join the pact so that Japanese
exporters can better compete with overseas rivals, but
politically powerful agricultural lobbies oppose the
participation for fear of the influx of overseas farm products.
"What's important is how much headway the government will be
making on these fronts." Sumitomo Mitsui's Muto said, noting
that government could be wary of taking measures that could
impact voter sentiment ahead of elections for the upper house
set for July.
($1 = 88.5400 Japanese yen)
(Editing by Edmund Klamann and Simon Cameron-Moore)