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Japan tweaks up key economic assessment for first time in eight months

Kyodo

The government on Wednesday revised its basic assessment of the economy for January upward, the first rise in eight months, noting a sign of improvement in new car sales and a positive impact from a weaker yen.

While the economy “has shown weakness recently due to deceleration of the world economy, signs of bottoming out can be seen in some areas,” the Cabinet Office said in a monthly report.

The report was the first to be compiled by the government led by Prime Minister Shinzo Abe’s Liberal Democratic Party, which regained power last month. Abe has put priority on ending deflation and advocates strong monetary easing.

“Private consumption has been holding firm recently,” as seen in a recovery in auto sales in December, while business sentiment is showing signs of improvement in some areas amid recent rises in stock prices and a weaker yen, the report said, upgrading the two components.

Economic and fiscal policy minister Akira Amari told reporters that the government raised its assessment of the broader economy, given the “favorable effect” of receding concerns over the strong yen as well as higher share prices on corporate sentiment.

To put the deflation-beset economy on a recovery track, Amari said the government wants the Bank of Japan to carry out “bold easing” to achieve a 2 percent inflation target “as soon as possible.”

The central bank agreed Tuesday with Abe’s government, formed Dec. 26, to set the inflation goal and to adopt “open-ended” easing steps similar to those of the U.S. Federal Reserve, meaning it will buy Japanese government bonds and other relatively safe financial assets from financial institutions without setting a deadline.

A Cabinet Office official noted that domestic automobile sales have slightly picked up after suffering a setback due to the end in September of the government’s subsidy program for purchases of environmentally friendly vehicles, but said the pace of recovery is not fast.

Three of the 14 categories in the government’s latest report were revised upward, including industrial production.

The unemployment rate dropped 0.1 percentage point to 4.1 percent in November, but the number of new job offers has not improved, the report said.

But it added, “The improvement in the employment situation appears to be pausing, while some severe aspects still remain.”

Exports to Asia and the United States have been moderately decreasing, leading to weaker manufacturing and a limited business investment, the report said. But overall exports will likely stop declining amid the recent trend of a weaker yen, it added.