By Max Sato
(MaceNews) – Japan’s government Friday stuck to its recent assessment that the domestic economy is showing signs of a pickup from the pandemic-caused slump, pointing to a mixed bag of data – more cautious consumer spending against brighter spots in business investment and housing construction, according to its monthly report released by the Cabinet Office.
The government continued to see a gradual pickup in global demand, upgrading its views on China and Taiwan for the first time in three months while noting that weakness lingered in Germany and Britain.
The government maintained its cautiously optimistic view that both the domestic and global economies are “showing signs of a pickup,” a statement unchanged since last July when it revised up its overview.
On the near-term outlook, the government repeated, “The economy is expected to continue showing signs of picking up, supported by the effects of the policies and improvement in overseas economies.”
But it also stressed the need to watch for the negative impact of lockdowns and tougher restrictions on economic activity, saying, “Full attention should be given to the further increase in downside risks.” The word ‘increase’ was added to reflect weak economic indicators in some regions.
Key points from the monthly report:
The government revised down its view on private consumption for the second straight month. Spending on some services, such as eating out and traveling, has slowed down further amid surging new coronavirus cases and shortages of hospital beds for COVID-19 patients in big cities.
Spending on goods remains solid as demand for home office furniture and appliances is strong and people are cooking more at home during the pandemic. Lower temperatures last month supported winter clothing sales.
Among other brighter spots, the government revised up its assessment on business investment in equipment for the first time in 28 months.
Carmakers and manufacturers of production machinery are increasing or upgrading their capacity, it said, adding that telecom carriers as well as wholesalers and retailers are changing their systems and networks more in tune with the fifth-generation technology standard and e-commerce transactions.
The government maintained its view that exports are increasing. Ministry of Finance data released Thursday showed that Japanese exports rose 2.0% on year in December, posting the first year-on-year gain in 25 months, thanks to higher shipments of plastics, non-ferrous metals and semiconductor-producing equipment.
But the trade data also showed that exports dipped a seasonally adjusted 0.1% on month in December. In addition, the Bank of Japan’s real export index fell a seasonally adjusted 1.0% in December, marking the first month-on-month drop in seven months after rising 3.7% in November.
Other details:
The government’s assessment of key components of the economy in the monthly economic report:
* The pickup in private consumption “appears to be pausing” vs. private consumption is “picking up as a whole while weakness is seen in some sectors” (the second straight monthly downgrade; last upgraded in October).
* Business investment is “starting to level off” vs. “decreasing” (the first upgrade in 28 months since September 2018).
* Housing construction is “flat on the whole” vs. “has a soft tone” (the first upgrade in 30 months since July 2018).
* Exports are “increasing” (unchanged; upgraded in November).
* Industrial production is “picking up” (unchanged; upgraded in November).
* Corporate profits are “decreasing substantially” due to the impact of COVID-19 but “the rate of decline is slower as a whole” (unchanged, upgraded in December)
* Employment conditions are improving with some soft spots (unchanged; upgraded in September).
* Consumer prices are flat (unchanged; downgraded in March).
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Contact this reporter: max@macenews.com.
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