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Latest assessment adds ‘recovery’ to rhetoric

Kyodo

The government Tuesday upgraded its basic assessment of the economy for the third straight month as business investment has begun showing signs of bouncing back, using the word “recovery” for the first time in 10 months.

In its monthly economic report for July, the administration of Prime Minister Shinzo Abe, which has been working to end nearly two decades of deflation since its December formation, also gave a brighter view of the country’s price situation.

“The Japanese economy is picking up steadily and shows some movements on the way to recovery,” the Cabinet Office said in the report, making upward revisions to four of the 14 categories, including capital spending and industrial production.

In last month’s report, the government said the world’s third-largest economy is “picking up steadily,” given that the weaker yen has helped exports, encouraging more firms to beef up output.

Earlier this month, the Bank of Japan also raised its assessment of the nation’s economy for the seventh consecutive month, saying it is “starting to recover moderately.”

As for prices, the office changed the phrase to describe them in July for the first time in two months as inflation expectations among households have been rising with hopes for economic recovery growing. “Recent price developments indicate that the deflation is easing,” the report said.

Economic data have suggested that prices may start to rise later this year on the back of Abe’s policies, which have centered on drastic monetary easing, and the depreciation of the yen, which is pushing up import costs.

The nation’s May consumer prices were flat compared with a year earlier, leaving negative territory for the first time in seven months, the government said late last month.

For July, the Cabinet Office upgraded its assessment of business investment for the first time in four months, noting it “is leveling off and shows some movements of picking up,” with corporate performance improving.

The BOJ’s quarterly “tankan” survey released earlier this month showed large companies in all industries plan to boost their investment by 5.5 percent in fiscal 2013, which ends next March, against the 2.0 percent decline indicated in the previous survey.

The government also said industrial production is “increasing at a moderate pace,” while exports “show movements of picking up.”

The economy grew at an annualized rate of 4.1 percent during the first three months of 2013 in inflation-adjusted terms, the fastest rate of gain in a year, buoyed by robust consumer spending and growth in exports.

Exports jumped 9.1 percent from a year earlier in May, with the yen sliding versus the dollar by 26.8 percent on year on an average basis and the euro by 28.5 percent.