October 25, 2017 / 8:34 AM / a year ago

Japan government keeps moderately upbeat view on economy in October

TOKYO (Reuters) - Japan’s government maintained its moderately optimistic view on economic growth in October, indicating that a recovery remains on track due to increased consumer spending and capital expenditure.

FILE PHOTO - People are seen at a market street in Tokyo, Japan, January 23, 2017. REUTERS/Kim Kyung-Hoon/File Photo

In its monthly economic report for October released on Wednesday, the government also maintained its optimism that exports and industrial output will continue to drive growth in the world’s third-largest economy.

“Japan’s economy continues to recover moderately as a trend,” the Cabinet Office said in the report, maintaining its assessment for the fifth straight month.

The government kept intact its view that consumption is “picking up moderately” as shoppers continue to buy new cars, clothes, and luxury goods.

The government said capital expenditure is “picking up”, unchanged from the wording it used a month earlier, reflecting gains in machinery orders and shipments of capital goods.

The report also said exports and output are “picking up”, again the same assessment as last month, as demand from overseas economies remained firm.

The Cabinet Office report comes one week before a Bank of Japan policy meeting on Oct. 30-31 where the central bank will update its consumer price forecasts.

Currently, the BOJ predicts that consumer inflation will hit its 2 percent target by March 2020, but this is looking increasingly unlikely.

The BOJ is in a bind, because the economy has performed well this year due to domestic and external demand, but inflationary pressure has not increased much.

Despite four years of massive quantitative easing, core consumer prices are forecast to have risen only 0.8 percent in September from a year ago, less than half the BOJ’s inflation target.

The government will release the CPI data on Oct. 27.

A summary of opinions at the BOJ’s previous meeting showed one member, who was not identified, said the central bank’s quantitative easing is not enough to achieve 2 percent inflation, which has sparked debate about whether the central bank’s policy framework is still appropriate.

Reporting by Stanley White; Editing by Richard Borsuk

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