• Kyodo

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The government on Wednesday downgraded its key assessment of Japan’s economy for the first time in three months as consumption was further dampened under the extended state of emergency over the coronavirus pandemic.

The Japanese economy shows “further” weakness in some components and remains in a severe situation due to the coronavirus pandemic, the Cabinet Office said in its monthly report for May describing the overall situation for the Japanese economy, but added there are continued signs that it is picking up momentum.

In the previous month, the report said the economy showed weakness in some components but did not use the word “further.”

By component, the office revised downward its view on consumer spending, the first downgrade in three months.

With people asked to stay home and restaurants and bars to close early under the nation’s third state of emergency over the virus since late April, it said consumption “shows weakness further recently, especially in service spending.”

In April, the report said private consumption had shown “a weak tone recently.”

Amid a fourth wave of infections triggered by highly contagious virus variants, the third emergency initially declared for Tokyo, Osaka and two other prefectures was scheduled to end on May 11.

But the government has extended it to next Monday and expanded areas under the restrictive measures to 10 prefectures. With the virus spread showing no signs of abating, it plans to make a final decision later this week on whether to extend the emergency into June, a senior government official said.

“Consumption began to decline in mid-April and plunged to quite a low level during the Golden Week holidays” from late April to early May, usually one of the busiest times of the year for the tourism sector, a government official told reporters.

“Spending on goods has been relatively solid, but that on services remains sluggish,” the official added.

The monthly report also downgraded its view on corporate business assessments for the first time in four months, saying they “appear to be pausing” in recovery, while “some severe aspects still remain.”

As for exports, the office retained its evaluation but adopted a different wording. It said that exports “continue to increase moderately,” compared with the phrase “increasing at a slower pace” in the April report.

Assessments on other major components were unchanged, with the latest report saying that business investment and industrial production are “picking up.”

Looking forward, the government said the economy is expected to continue picking up but warned “full attention should be given” to a further increase in downside risks due to the spread of virus infections in Japan and abroad.

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