The government on Friday effectively slashed its basic assessment of the Japanese economy amid sluggish private consumption, but avoided giving its view on whether the pace of recovery was decelerating or not.
The Cabinet Office retained the description that the economy “is on a moderate recovery path” in the latest monthly economic report but said “slowness can be seen in some areas” such as private consumption and exports.
The expression apparently reflects the government’s weakening view of the economy after saying last month that “variation in the tempo of improvement can be seen in some areas.”
Economic and Fiscal Policy Minister Akira Amari said the government maintains the view that the economy continues to recover moderately and giving a clear negative indication could pour cold water on the recovery.
“The economy’s undercurrent continues to recover moderately and factors to strengthen the move are being put into place,” Amari told a press conference. But giving a clearer expression could erase the effect of such subtle factors, he said.
It is rare for the government not to clarify whether or not there is a change in its basic assessment from a month earlier.
If the government had slashed its assessment, it would have been the first downward revision since October 2014.
A Cabinet Office official said the government neither maintained nor downgraded its assessment but added that improvement in personal spending and corporate investment has been slow despite a recovery in employment and income situations.
By category, the government revised upward its view on corporate profits, saying they are “improving.” Last month it said they generally showed “a trend toward improvement.”
Meanwhile, the government cut its assessment on corporate sentiment, saying caution can be seen in some areas. This followed a business confidence survey among people with jobs particularly sensitive to economic conditions dropping its index below the boom-or-bust line of 50 in August.
It kept unchanged its view on private consumption as holding firm as a whole, while also maintaining the assessment that exports have been “in a weak tone recently.”
But a recovery in personal spending has remained sluggish due to rising prices of daily necessities and exports have been weighed down by the decelerating Chinese economy.
Looking ahead, the government warned of downside risks including a slowdown in emerging Asian economies such as China. The United States may also raise its interest rates in the process of normalizing monetary policy, which could cause an outflow of funds from the emerging economies.
“Attention should be given to the effects of the lengthening of fluctuations in the financial and capital markets under such circumstances,” the government said.
The report came after global stock markets suffered major losses following China’s move to devalue the yuan, while the timing of a U.S. interest rate hike remains uncertain after the Federal Reserve decided last week to maintain ultralow interest rates.