Outlook upgraded for a second month

Industrial output picking up amid expected upturn for exporters


The government on Wednesday upgraded its basic assessment of the economy for the second straight month, saying industrial output has picked up in February amid expectations that a global economic upturn could perk up exports.

“The Japanese economy is bottoming out, while weakness can be seen in some areas,” the Cabinet Office said in its monthly report, making upward revisions to four of the 14 categories — production, corporate profits, business sentiment and consumer spending.

It was the first time in two years that the government has raised the assessment for two months in a row, adding to the view that the world’s third-largest economy has bottomed out and is on the road to recovery.

Last month, the Cabinet Office upgraded its assessment for the first time in eight months, saying that while the economy “has shown weakness recently due to deceleration of the global economy, signs of bottoming out can be seen in some areas.”

For February, the Cabinet Office upgraded its assessment of industrial output for the second straight month.

The government also said private consumption is “firm,” corporate profits “show signs of bottoming out” and business confidence “shows signs of improvement,” though it added that exports have been “moderately decreasing recently” and business investment shows weakness.

The economy shrank an annualized real 0.4 percent in October-December for the third straight quarterly contraction on tepid exports and capital spending.

But Prime Minister Shinzo Abe’s administration, formed Dec. 26, believes exports are likely to rebound as the world economy recovers and the yen depreciates against other major currencies.

The recovery “is expected to resume, gradually supported by the improvement of confidence, the improvement of export conditions and the effect of the policy package and monetary policy,” the Cabinet Office said.

In January, exports climbed for the first time in eight months, up 6.4 percent from a year earlier, following a 5.8 percent decline in December, the Finance Ministry said last month.

The monthly report, meanwhile, said the global economy is likely to become firmer, but downside risks linger, including the eurozone sovereign debt crisis and the U.S. “fiscal cliff” of simultaneous tax hikes and spending cuts.

Economists skeptical


Private-sector economists are skeptical about the government’s bullish estimate for the effects of the stimulus package financed by the supplementary budget enacted Tuesday.

The government projects the stimulus will push real gross domestic product up 2 percent and create 600,000 jobs. The positive effects are estimated to mostly become visible in fiscal 2013 starting in April. The government also expects its forthcoming growth strategy to further boost the economy.

However, the consensus among private research institutes appears to be that the stimulus package will raise GDP by some 1 percent at most. They foresee delays in public works projects due to construction labor shortages and wonder how effective new public-private business support investment funds, part of the stimulus package, will prove to be.

Mizuho Research Institute projects the stimulus package will push up GDP by 0.6 percent in fiscal 2013 alone and 1.1 percent in fiscal 2013-2014.

“We can’t factor in the public-private funds, as their effects remain uncertain,” said Yasuo Yamamoto, a senior economist at the institute.

Mitsubishi Research Institute estimates the package will raise GDP by 0.7 percent each in fiscal 2013 and 2014.

“The economic measures are nothing but a shot in the arm with only short-term effects,” chief economist Yoko Takeda said. “It is important for the government to adopt a full-fledged growth strategy before the effects disappear.”