Economy showing feeble signs of revival

Consumption, spending seen firming despite steady deflation

Kyodo

The economy is “picking up” along with private consumption and public spending, the government repeated Thursday in its monthly report on the state of the economy.

In its February report, the Cabinet Office reiterated that production is recovering slowly from the slowdown caused by Thailand’s floods and that exports are still weakening as global economic prospects remain gloomy because of the eurozone debt crisis.

The report follow’s Monday’s dismal report on gross domestic product, which fell at a real annualized rate of 2.3 percent in the final quarter of 2011, exceeding market forecasts, and the Bank of Japan’s announcement Tuesday that additional monetary easing was in the works to battle persistent deflation.

“The Japanese economy is still picking up slowly, while difficulties continue to prevail” from the March 2011 earthquake and tsunami, the Cabinet Office said, repeating the main assessment for the fourth consecutive month.

Among items that actually improved were private consumption, which was described by the phrase “holds firm recently.” Strong retail sales, improving consumer sentiment and slower drops in wages amid a recovery in employment conditions led to the upgrade, one official said.

Public investment was also upwardly revised to “stays firm,” underpinned by huge government spending on reconstruction from the March 11 disasters that devastated the northeast.

The assessment for housing construction, however, was downgraded with the phrase “leveling off recently,” reflecting the reversal from last summer’s surge in housing starts before the expiration of a government subsidy program.

The report also noted a shortage of construction workers throughout the country except in quake-hit Tohoku, where most of them have shown up for reconstruction projects.

Assessments of 11 other components in the report were left unchanged, including industrial output (“still picking up slowly”) and exports (“weakening recently”).

Corporate capital spending “is leveling off,” the report said, while employment conditions remain “severe partly due to the earthquake disaster” although showing “signs of picking up,” while recent price movements indicate the economy is in a “mild deflationary phase.”