The economy treaded water in November, thanks to steadily growing demand, but exports weakened for the third consecutive month amid signs that emerging economies are slowing, the government said Friday.
The downgrade to exports, which fell 0.6 percent in the quarter through September, was Japan’s first since September-November 2002, signaling that external demand has been too tepid to bolster the recovery for the past few months.
The world’s third-largest economy “is on the way to recovery at a moderate pace,” the Cabinet Office said in its monthly economic report.
Of the 14 categories in the report, including consumer spending and industrial production, only corporate profits merited an upgrade for persistently “improving, mainly among large firms.”
Exports have shown “weak tone recently,” although last month they were described as “almost flat.”
The expression reflects how reluctant the government is to play up the economy, which has shown nascent signs of challenging nearly two decades of deflation.
“The slowing down of overseas economies is still a downside risk for the Japanese economy,” the report said.
Exports, a major driver of the economy, declined 0.6 percent in the quarter through September, down for the first time in three, after climbing 2.9 percent in April-June, the latest gross domestic product data said last week.
A Cabinet Office official, however, took a cautiously optimistic view of exports, saying they are likely to pick up on a potential global economic recovery and a further drop in the yen, which many analysts say is being weakened by the Bank of Japan’s aggressive monetary easing.
A falling yen usually supports exports, which account for around 15 percent of GDP, by making Japanese products cheaper abroad and boosting the value of overseas revenues when reconverted to yen.
On business investment, part of Prime Minister Shinzo Abe’s plan for economic growth, the government left its previous view intact, saying it “shows movements of picking up, mainly among nonmanufacturing industries.”
It also maintained its line on consumption, which is responsible for about 60 percent of GDP.
Consumption is “on a trend of picking up” ahead of the first stage sales tax hike to 8 percent next April.
As for prices, the report said: “Recent price developments indicate that deflation is ending.”
Consumer prices rose 0.7 percent in September from a year ago for the fourth straight month of increase due to higher electricity and gasoline prices as well as hikes in some durable goods prices, government data showed last month. But if energy and fresh food are removed, prices were flat.