Economic policymakers on Tuesday showed their strongest confidence yet that the nation has emerged from the lull that started in autumn and upgraded their economic assessments accordingly.
During an evening news conference, Economic and Fiscal Policy Minister Heizo Takenaka attributed his belief in an economic upswing to pickups in exports, major progress in adjustments in the information technology sector and rising personal spending.
His remarks were in line with the latest and the most upbeat assessment yet by Bank of Japan Gov. Toshihiko Fukui, who said earlier in the day that the economy “has almost moved out of a pause.”
The stance shown by the top economic minister and the central bank chief marks a major turnaround since November, when the government said the recovery that started in January 2002 had come to a standstill as inventory and production adjustments in the IT sector had expanded and exports had slowed.
“We believe the economy has now emerged from the standstill,” Takenaka said. “This is in line with a government scenario that the economy will overcome the lull around the middle of the year.”
Takenaka aired his upbeat view just a day after Prime Minister Junichiro Koizumi dissolved the House of Representatives for a general election on Sept. 11, which observers say will give the Koizumi camp a boost in the ruling Liberal Democratic Party and coalition partner New Komeito.
Confidence was also oozing from the government’s monthly economic report for August, also released Tuesday, which saw the word “weak” deleted for the first time since November.
“The economy is recovering at a moderate pace with the corporate sector as well as the household sector improving,” the Cabinet Office said in the report, upgrading its economic assessment for the first time in two months.
In July, the office said, “The economy is recovering at a moderate pace, while some signs are seen of coming out of a weak situation.”
It was the first time since November that the phrase “weak situation” or “weak movements” has disappeared from the government’s economic assessment.
The recovery, which began in January 2002, had been at a standstill since autumn as inventory and production adjustments in the IT sector have expanded and exports, particularly to China, have slowed.
“We believe the economy has now emerged from the standstill,” said a senior Cabinet Office official briefing reporters. “This is in line with a government scenario that the economy will overcome the lull around the middle of the year.”
Looking ahead, the August report maintains an upbeat view, saying the domestic demand-led recovery is expected to continue because resiliency in the corporate sector is extending into the household sector, as shown by recent upbeat indicators.
But it urges policymakers to pay close attention to the impact of high oil prices.
The government believes the inventory adjustment in the IT sector is “nearing an end” due to an improved supply-demand balance in the semiconductor industry and steady earnings reports from U.S. chip makers, the Cabinet Office official said.
IMF hikes outlook
WASHINGTON (Kyodo) The International Monetary Fund on Monday raised its outlook for Japan’s economic growth in 2005 to 1.8 percent from its April projection of 0.8 percent, citing recovery in personal consumption and private capital investment.
But the IMF, in a report on its annual consultation with Japan on economic and policy issues, trimmed its forecast for 2006 to 1.7 percent from April’s 1.9 percent, attributing the move to a gradual slowdown in the future to a relatively low medium-term potential growth estimated at 1.5 percent.
While consumer prices are expected to bottom out in 2006 with deflationary pressures easing on the heels of the economic recovery, the IMF warned of downside risks, including possible global economic weakening on higher oil prices as well as the yen’s renewed depreciation.
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