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Japan Govt. Ups Economic Assessment Amid Capex Gains

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The Japanese government on Friday upwardly revised its assessment of the economy for the first time in four months as the recovery picked up, reflecting improvement in household income and business investment.

"The Japanese economy is recovering at a moderate pace," the Cabinet Office said in its monthly report. This is an upgrade from its view last month that the economy is "in the process of recovery at a moderate pace."

The January report suggested that the economy may continue to recover as income and capital expenditure maintain their upward trend.

It also noted that industrial production is increasing at a moderate pace although exports were in a weak tone recently. According to the Cabinet Office, corporate profits are improving while firms' assessment of current business conditions remained upbeat.

The employment situation continued to improve, the report said. Private consumption is increasing, reflecting a spur in demand in some sectors before a planned consumption tax hike in April.

At the same time, consumer prices held firm, the report noted. The Cabinet Office dropped the word "deflation" from its monthly report in December, as core consumer prices recorded the sharpest increase in five years in November.

The Cabinet Office reiterated that the slowdown of overseas economies still remained a downside risk for Japan's economy. The report also noted that the government was mindful of the risks of a possible sharp decline in demand in response to the April tax hike.

Japan's economic growth eased to 0.3 percent in the third quarter of 2013 from 0.9 percent in the second quarter, data showed last month. On an annualized basis, the economy grew 1.1 percent.

The Bank of Japan also expects the economy to continue to recovery moderately going forward, but has cautioned that growth will be affected by the front-loaded increase and the subsequent decline in demand before and after the consumption tax hike.

On Thursday, the BoJ upgraded its assessment for five of the nine regions in Japan, citing firm domestic demand, a moderate increase in production and an improvement in the employment and income situation.

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