The economy remains on a recovery track amid increasing domestic demand, though risks including trade tensions warrant caution, the government has said.
In the December edition of its monthly economic report, the Cabinet Office maintained its headline assessment that the economy “is recovering at a moderate pace” and retained its evaluations of key elements such as private consumption, business investment and exports.
“Although a moderate pace of recovery is expected to continue, there are risk factors in foreign demand,” Toshimitsu Motegi, the minister in charge of economic and fiscal policy, said at a news conference, citing the trade dispute between the United States and China among other developments abroad.
Motegi admitted that the nation’s economy shrank in the July-September quarter but he added that it was a one-time setback due to damage from torrential rain in western Japan, a major earthquake in Hokkaido and other natural disasters.
From 2002 to 2008, when Japan posted its longest period of economic expansion in the postwar period, the annualized growth rate was 1.6 percent. The Cabinet Office estimates 1.2 percent growth during the recent period of overall positive growth that dates back 73 months.
Private consumption, which accounts for more than half of the economy, is “picking up,” while spending by companies is “increasing” and expected to remain strong amid robust corporate profits, the Cabinet Office said.
Exports are “almost flat” as a slowdown in demand for smartphones in Asia has caused a decline in orders for electronic components and manufacturing machinery.
As in the previous month’s report, the office warned of the negative impact of the tariff war between the United States and China.
“Attention should be given to the risks including the effects of situations over trade issues on the world economy, the uncertainty in overseas economies and the effects of fluctuations in the financial and capital markets,” it said.