EPA assessment left unchanged for month

The economy is showing signs of nearing a self-sustaining recovery trajectory, the Economic Planning Agency said Friday, leaving its overall assessment of the economy unchanged from the previous month.

“As positive activities by firms have been observed, there are gradual movements toward an autonomous recovery,” the EPA said in its monthly report for April.

The EPA used the expression “recovery” last month for the first time since the latest recession began in April 1997.

EPA chief Taichi Sakaiya applauded the fact that signs of approaching a self-sustaining recovery path have been observed for two months in a row, but noted the economy has yet to get back to a stable growth path.

“The flight angle from recession is not sharp and the economy is not on a stable path (of growth). But the impetus of the takeoff is gaining momentum,” Sakaiya told a press conference after the day’s Cabinet meeting.

Sakaiya’s comments follow the latest monthly report, in which the EPA noted “the Japanese economy has not yet cleared the severe situation, as recovery in aggregate demand remains weak.”

Takashi Omori, a senior official at the agency’s Research Bureau, said the agency upgraded its assessments of personal consumption and corporate investment in facilities and equipment because those sectors saw improvements.

Regarding personal consumption, sentiment is improving, sales of electrical appliances are looking brighter and travel expenditures are on the rise, Omori said.

Despite such improvements, the agency did not further upgrade its overall assessment of the economy partly because personal consumption is not yet on a growth trend due to sluggish income levels, he said.

He also said there are negative aspects in public spending and housing spending and that unemployment remains high.

The agency said in the report, “The level of housing investment is higher than a year ago, but is decreasing from the levels seen at the beginning of the year.”

It added, “The level of public works projects is considerably lower than was seen a year ago, although the effects of the second supplementary budget are becoming apparent.”

As for corporate activities, the agency said, inventory adjustments have been completed and industrial production is gradually improving.

It also said corporate profits are improving and that corporate confidence has further improved.

Omori said the information technology sector, in particular, is underpinning the economy by contributing to increases in production, capital investment and employment.