The government on Monday revised upward its basic assessment of Japan’s economy for the first time in eight months in March, as the business climate has been improving with the negative impact of last April’s consumption tax hike receding.
“The Japanese economy is on a moderate recovery, as improvement can be seen in the corporate sector,” the Cabinet Office said in its monthly report, upgrading its views on three of the 14 categories — industrial output, corporate profits and business sentiment.
As for private spending, which was significantly hurt by the 3-percentage-point tax increase to 8 percent, it “holds firm as a whole,” the government said, deleting the phrase that weak consumer confidence is one of the downside risks to the country’s economy.
Looking ahead, Japan’s economy is expected to continue to recover due in part to lower crude oil prices, but a possible slowdown in the world economy could threaten the nation’s economic growth, the office said.
Some analysts say the government is too optimistic about Japan’s economy, given that domestic demand has shown little sign of bottoming out, with average monthly household spending falling for the 10th straight month from a year earlier in January.
Japan’s economy shrank for a second consecutive quarter through September last year, and rebounded only 0.4 percent from the previous quarter in inflation-adjusted terms during the October-December period.
Economic and Fiscal Policy Minister Akira Amari acknowledged private spending is not yet strong enough to shore up the economy, although consumer sentiment has been picking up.
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