The Cabinet Office believes the economy is recovering moderately despite some weakness, according to its monthly report for February released on Thursday. The report warned, however, of risks from uncertainty overseas.
The Cabinet Office downgraded its assessment of the world economy for the first time since last August due in part to corporate weaknesses in the United States and the eurozone.
Japan is “on a moderate recovery, while weakness can be seen in some areas,” it said, leaving unchanged its assessments of all 14 categories. The government retained its assessment of corporate profits as “improving.”
“Firms’ judgment on current business conditions is almost flat, while cautiousness can be seen in some areas,” it said.
A Cabinet Office official attributed the evaluation to solid earnings reports for the October to December period that were released by domestic companies.
On industrial production, the government upheld the view that it has been “flat.”
“Inventories for construction machinery remained high, and the production of electronic parts for smartphones lacked strength,” the official said.
Meanwhile, the government kept intact its assessment of exports as “weak.” The official said automobile exports to the United States were on the rise, while demand for capital goods in China and other Asian countries was sluggish.
“Last-minute demand ahead of the Chinese New Year could often lead to robust exports for China and other Asian countries. But this year it was weaker than before,” the official added.
Looking ahead, the Cabinet Office said the economy is expected to move toward recovery, but it also said attention should be given to the increased uncertainty in overseas economies, referring to a slowdown in emerging Asian markets, including China.
The report also warned of the negative effects of fluctuations in the financial markets against the backdrop of fears over the global slowdown. It said the Chinese economy is slowing moderately.
The markets have seen volatility so far this year, with the Nikkei average moving between the 14,000 level and the 18,000 mark.
As for the negative interest rate implemented this month, the official did not elaborate on its impact on the economy, saying it happened too recently.