March 17, 2014 / 8:51 AM / 4 years ago

Japan government remains upbeat on economy despite worries over exports

TOKYO (Reuters) - Japan’s government upgraded its view on factory output while leaving its overall economic assessment unchanged, sounding upbeat on the world’s third-largest economy.

Pedestrians pass by an electronic board displaying stock prices, which are reflected in a polished stone surface, in Tokyo March 7, 2014. REUTERS/Yuya Shino

The government, in its monthly report issued on Monday, described the economy as “moderately recovering,” echoing a similar view last week by the Bank of Japan.

Policymakers are confident of a spurt of last-minute demand ahead of a sales tax increase which takes effect April 1.

But the report flagged risks to the outlook such as the expected drop in consumption after the tax hike and a slowdown in the global economy, which could pressure exports.

Lacklustre exports have been a concern for the government, which is counting on shipments to help cushion the expected dent in domestic activity when the sales tax rate rises to 8 percent from the current 5 percent.

“We see the economy on a firm footing as corporate earnings perform well and job conditions improve steadily,” said a Cabinet Office official in charge of compiling the report.

“The last-minute demand is increasingly spreading from cars to household appliances, furniture and clothing.”

Factory output is increasing as a result, the March report said, an assessment which the government considers an upgrade from its previous view that industrial output was rising “moderately”.

It marks the first upward revision on output since July.

However, the government cut its view on housing investments, saying growth was slowing, with the last-minute boom already seen tapering off in the housing sector. Previously, it had said housing construction was increasing due to the rush to beat the tax increase.


The government stuck to its assessment on exports, saying they are flat, following a similar view seen by the BOJ.

“There are some risks from emerging market economies,” Vice Economics Minister Yasutoshi Nishimura told reporters.

“But advanced economies — the United States and Europe — are recovering moderately, so exports to these regions will help offset to some extent” an expected drop in demand after the sales tax increases, Nishimura said.

Last week the BOJ cut its view on exports, saying they had levelled off, although it did raise its assessment on capital spending and sounded more upbeat on factory output.

The central bank kept its massive monetary stimulus intact at the March 10-11 policy review, sounding confident about meeting its 2 percent inflation target by around early 2015, which is seen as difficult by many private-sector analysts.

With core consumer inflation at five-year high of 1.3 percent in January, the government reiterated that it expects the BOJ to meet the price goal at the earliest possible time. The March report described prices as “rising moderately.”

Reporting by Tetsushi Kajimoto; Editing by Richard Borsuk

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