December view on the economy remains intact

JIJI, Kyodo

The government said Friday it has kept its basic economic assessment intact for December after four straight months of downgrading.

“The Japanese economy shows weakness recently due to deceleration of the world economy,” said a monthly economic report compiled by the Cabinet Office.

Economic and fiscal policy minister Seiji Maehara noted downside risks from overseas economies such as fiscal uncertainties in the United States and Europe.

“Fundamental problems in the world economy will not be solved easily. We face uncertainties,” Maehara told reporters.

The government revised down its assessments of exports, corporate earnings, business sentiment and corporate capital expenditures, while painting a brighter picture of production and personal consumption.

Exports have been moderately decreasing recently, the government said after noting “a weak tone” in the sector in November. This is the first downgrading of the sector in four months.

Following sluggish results in the Bank of Japan’s “tankan” quarterly survey released last week, the government observed a “weak tone” in corporate profits, which were described as leveling off in November, and further cautiousness in business sentiment.

Business investment “shows weakness,” the government said after Finance Ministry data, published early in December, showed that capital spending decreased for the third straight quarter in July-September on a quarter-on-quarter basis.

The government now sees the downtrend of industrial production becoming “moderate,” revising up its view on the sector for the first time since August 2011.

Automakers have increased production as they are recovering from sales drops caused by the end of an auto purchase subsidy program in September, a Cabinet Office official said.

In addition, electronic parts and device makers have fared well thanks to progress in inventory adjustment and demand increases tied to the launch of new electronic products such as smartphones, the official said.

But the official warned against optimism, saying, “Output growth will end soon unless exports recover.”

The December economic report noted high uncertainty about overseas economies as a downside risk to the economy.

The government said personal consumption “is almost flat” after noting the sector’s weakness in November.

The government carried out its first upgrade of the sector in seven months, as retail sales are brisk mainly thanks to a recovery of auto sales and higher department store sales, according to the official.

Looking ahead, the report said the economy is expected to keep showing “weakness” for the time being.