The Japanese government on Tuesday lowered its economic assessment for the first time in ten months as global slowdown and an intensification of the euro area debt crisis damped the country's exports and industrial production.
"The Japanese economy is on the way to recovery at a moderate pace partly due to reconstruction demand, while some weak movements are seen recently," the Cabinet Office said in its latest monthly report.
The assessment was more downbeat compared to the government's view published in the July report, when it said the "economy is on the way to recovery at a moderate pace partly due to reconstruction demand, although difficulties continue to prevail."
In the August report, the Cabinet Office said exports are in weak tone and industrial production has leveled off. Movements toward economic recovery, which would be affected by a growth slowdown in overseas economies for the time being, are expected to continue due to reconstruction demand to some extent, the report added.
It noted that further slowdown of overseas economies and sharp fluctuations in the financial and capital markets due to high degree of uncertainty about the prospects of the Eurozone debt crisis are the main downside risks faced by the Japanese economy.
According to the report, corporate profits are picking up, while business investment is improving slowly. Firms' judgment on current business conditions is showing a modest improvement as a whole.
Employment situation is also showing signs of improvement, while private consumption is on the rise at a moderate pace, the Cabinet Office said.
The government vowed to work together with the Bank of Japan to help the economy exit deflation and curb further weakening in the growth rate. The government said it will also take steps to prevent the economy from falling into "vicious cycle between yen appreciation and deflation."
Japan's gross domestic product rose 0.3 percent quarter-on-quarter in the second quarter, following a 1.6 percent gain in the first quarter. BoJ Governor Masaaki Shirakawa warned last week that prolonged gains in the currency is putting downward pressure on Japan's economy.
by RTT Staff Writer
For comments and feedback: firstname.lastname@example.org