The Japanese economy has bottomed out, the government declared Friday for the first time during the current recession. The government gave no indication, however, of whether they expected economic recovery.

“While the economy continues to be in a difficult situation, it has bottomed out,” the Cabinet Office said in its monthly economic report for May.

It was the first time since June 1999 — when it was announced a previous recession had ended three months earlier — that the government has acknowledged an end to economic deterioration.

The recent announcement was also the third month in a row that the government had upgraded it’s official economic view.

In March the government upgraded its assessment for the first time in 21 months, saying, “Signs of bottoming out can be seen in some areas.” In April, it said the economy “is showing movement toward bottoming out.”

But it is uncertain whether the economy will stay at a nadir for the time being or continue to improve, said Jun Saito, director for economic assessment and policy analysis at the Cabinet Office.

“What we mean by our latest comments is that the deteriorating trend of the economy has been halted and it will not further worsen from now, but not that it will head for a recovery,” Saito said.

The government attributed the upward revision of its view to its analysis of personal consumption, wholesale prices, industrial output, exports, corporate business confidence and corporate capital investment.

Looking ahead, the report points to downside risks stemming from severe unemployment and wage situations, as well as more optimistic expectations exports and progress in inventory adjustments will underpin the economy.

“As for short-term prospects, there are concerns over the downward pressure on private demand that may be exerted by such factors as severe employment and wage situations,” it says. “On the other hand, increases in exports, and progress in inventory adjustment are expected to prevent the economy from deteriorating further.”

Regarding individual economic elements, the report says industrial production “has bottomed out,” and business sentiment “is bottoming out” for large companies.

It also points to new “firmness” in some areas of personal consumption but continues to say overall trends in much of the wider economy are flat.

The report additionally notes a halt in the decline of wholesale prices and drops its regular reference to government vigilance against a deflationary spiral.

But it leaves untouched the view that consumer prices are tending to fall and also keeps a reference to the government’s resolve to emerge from deflation.

“We will have to carefully monitor (the economy) for a little while more to determine if the deflationary trend is changing,” Saito said.

Regarding corporate investment in facilities and equipment, the office improved its assessment in the report from a sharp decline to a moderate decline.

The report also specifically refers to an increase in exports to Asia. While exports in general are growing, led by growing trade in semiconductor chips, electronic devices and personal computers, steel exports to Asia are also enjoying a boom, Saito said.

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