The government on Tuesday upgraded its assessment of Japan’s economy for the first time in six months, using the strongest words to describe an improvement in personal spending since the burst of the asset-inflated bubble economy in the early 1990s.
“The economy is recovering at a solid pace as improvements in the corporate sector are extending into the household sector,” the Cabinet Office said in its monthly economic report for July.
It was the first time the office has used the word solid to describe economic recovery since August 1997.
The report says personal consumption is “moderately increasing,” the first use of the expression in the postbubble era to describe the economy’s largest component.
A Cabinet Office official said recent improvement in unemployment rates has bolstered household incomes, including those of spouses, leading to an increase in personal spending. Government data have shown that spending by Japanese wage-earning households rose a real 5.6 percent in May from a year earlier, the first time in 14 years such spending has grown by more than 5 percent over two straight months.
Personal spending accounts for about 60 percent of Japan’s gross domestic product.
The report says sharp rises in corporate profits and an improvement in employment also led the Cabinet Office to upgrade its economic assessment from June, when it said, “The economy continues recovering steadily with improvement in the corporate sector advancing.”
Japan’s jobless rate stood at 4.6 percent in May, the lowest in three years and nine months. The ratio of job offers to job-seekers came to 0.8 in May for the first time since April 1993. The July report says exports are rising, led by electric and general machinery to China and other Asian economies, luxury cars to the United States and automobiles to the 25-nation European Union.
Looking ahead, the Cabinet Office said the recovery “is expected to continue as the world economy recovers and domestic private demand increases steadily.”