By Max Sato
(MaceNews) – Japan’s government Tuesday maintained its overview on the domestic economy, which has been gradually moving out of the pandemic-caused slump, while noting exports were losing some steam, according to its monthly report released by the Cabinet Office.
The government said “signs of a pickup remain in place, although there is weakness in some areas.” Last month, it downgraded its overall assessment for the first time in 10 months by adding the part about the weakness.
As for overseas economies, the government maintained its assessment that “signs of a pickup are seen” amid severe conditions during the pandemic and upgraded its view on India. In recent months, it has revised up its assessments of South Korea, Indonesia, China and Taiwan.
On the near-term outlook, the government repeated, “The economy is expected to pick up, supported by the effects of the policies and improvement in overseas economies.”
But it also called for a close watch on how the development in coronavirus infections will affect domestic and global growth.
Key points from the monthly report:
The government revised down its view on exports for the first time in 10 months, saying they are increasing “at a slower pace.”
Japanese exports posted the first year-on-year drop in three months in February, down 4.5% vs. a 6.4% jump in January, partly in reaction to rush shipments to Asia in January before the Lunar New Year holidays last month, but the pickup trend in exports appears to be intact, backed by solid Chinese recovery demand, data released last week by the Ministry of Finance showed.
The government maintained its assessment of private consumption, saying it “has been in a weak tone,” after downgrading it for the third straight month in February.
Spending on some services, such as eating out and traveling, has been slow amid the government call for shorter business hours and more strict stay-home lifestyles. Household expenditures on goods remains solid as demand for home office furniture and appliances is strong and people are cooking more at home during the pandemic. New car sales were slower this month.
The government upgraded its view on business sentiment for the first time in eight months, noting it is “showing signs of a pickup, although tough conditions remain in some areas.” Previously, it said companies, particularly non-manufacturers, were “cautious.”
The monthly Economy Watchers Survey released this month by the Cabinet Office indicated that household and business confidence picked up in February on hopes that vaccination will contain the spread of the coronavirus and also due to continued solid consumer spending on takeout food, groceries and other stay-home items.
The Watchers sentiment index for Japan’s current economic climate rebounded 10.1 points to a three-month high of 41.3 in February on a seasonally adjusted basis, but it is still well below 53.0 in October, which was the highest in over six-years.
The Watchers outlook index, which shows sentiment about the situation two to three months ahead, also surged 11.4 points to 51.3 in February, hitting the highest since 52.1 in August 2018.
Other details:
The government’s assessment of key components of the economy in the monthly economic report:
- Private consumption “has been in a weak tone” (unchanged; last upgraded in October 2020; last downgraded in February 2021).
- Business investment is “showing signs of a pickup” (unchanged; upgraded in February 2021; downgraded in November 2020).
- Housing construction is “flat on the whole” (unchanged; upgraded in January 2021; downgraded in September 2019).
- Exports are “increasing at a slower pace” vs. “increasing” (the first downgrade since May 2020; upgraded in December 2020).
- Industrial production is “picking up” (unchanged; upgraded in November 2020; downgraded in April 2020).
- Corporate profits are “picking up as a whole while weakness is seen among non-manufacturers” due to the impact of COVID-19. (unchanged; upgraded in February 2021; downgraded in April 2020).
- Business sentiment is “showing signs of a pickup, although tough conditions remain in some areas” vs. business sentiment “has been cautious, particularly in the non-manufacturing sector.” (the first upgrade since July 2020; downgraded in January 2021).
- Employment conditions are improving with some soft spots (unchanged; upgraded in September 2020; downgraded in May 2020).
- Consumer prices are flat (unchanged; downgraded in March 2020).
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Contact this reporter: max@macenews.com.
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