Trade Resources Industry Views The Japanese Government Raised Its Assessment of The Economy's Direction

The Japanese Government Raised Its Assessment of The Economy's Direction

TOKYO — The Japanese government raised its assessment of the economy’s direction this month for the first time in half a year in light of a rebound in consumer spending.

“We think the reaction (after a demand surgeA transient variation in the current and/or potential at a point in the circuit. before April’s sales tax hike) is bottoming out,” Economic and Fiscal Policy Minister Akira Amari said at a news conference Thursday evening. He contended that the slump in spending was only temporary, and that the economy will likely avoid a double dip.

This rebound also led the government to upgrade its view of the economy in a monthly report released Thursday. Seasonally adjusted retail sales rose 4.6% on the month in May. The Cabinet Office observed a recovery trend in sales of appliances such as air conditioners and refrigerators after the downturn in April.

The government holds that the trend of consumers tightening their purse strings after the tax hike has run its course. But economic indicators paint a less clear picture of whether the economy has returned to its prior strong growth track.

While production is closely tied to business cycles, the industrial production index returned in May to its level from December 2013, before it swelled ahead of the sales tax hike. But the shipment index has not yet hit bottom, declining for a fourth straight month in May.

Many economists expect the economy to recover over the summer, but if shipments are slow to rebound, inventories will accumulate, eventually weighing on production.

The government downgraded its assessment of capital spending in the July report. A survey by the Bank of Japan pointed to a degree of growth this fiscal year, but machinery orders, an early indicator of capital spending, are currently lackluster.

One underlying issue is weak export growth. In May, the value of exports declined on the year for the first time in 15 months.

Some are optimistic about the outlook for the U.S. economy, a key factor for Japanese exports. Ethan Harris at Bank of America Merrill Lynch notes that the U.S. economy is entering a recovery phase driven by growth in such areas as capital spending and auto sales.

Still, there are concerns that offshoring and other factors limit how much Japanese exports can grow.

“The employment environment is good and wages are rising, so we’re moving into a virtuous cycle,” Amari said. The consensus view among economists is that the Japanese economy is bouncing back from the temporary slowdown in April.

 

Source: http://www.capacitorindustry.com/japan-upgrades-economic-outlook-for-first-time-in-6-months
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Japan Upgrades Economic Outlook for First Time in 6 Months