• Kyodo

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The government left its basic economic assessment unchanged Tuesday while pointing to weakness in production, exports and business investment.

The economy “shows weakness recently,” affected by the March 11 natural disaster, the Cabinet Office said in its monthly report, adding the economy “remains in a difficult situation such as a high unemployment rate.”

On the future outlook, “weakness will continue for a while,” the report said.

“Production and exports have declined recently,” it said, because the disaster has crippled major manufacturers, including auto and high-tech product makers, by disrupting supplies of industrial materials and electricity.

March industrial output dropped a record 15.5 percent from February due mainly to the supply disruptions. Exports subsequently slowed, registering their first decline in 16 months.

The Cabinet Office downgraded its evaluations of some components in the report, noting that “corporate profits are weighed down and business investment has weakened recently” and that “weak development can be seen in housing construction.”

Recent capital goods shipment and machinery orders data have indicated a downturn in capital spending, the office said. A sharp fall in housing starts in March signaled stalled construction in the disaster-hit northeast.

The report followed the government’s announcement last week that gross domestic product declined an annualized real 3.7 percent in the first quarter of 2011 for the second consecutive quarter of contraction.

The GDP figure, much weaker than market forecasts, prompted experts to warn that the economy has been pushed back into recession.

But the Cabinet Office denied the economy has entered a recession, stressing it had been on the mend following a temporary deceleration phase late last year, with the report saying that “as production activities will recover, the economy is expected to resume picking up, reflecting improvement in overseas economies.”

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