The government on Wednesday downgraded its basic assessment of the Japanese economy, citing weakening consumer and corporate sentiment due to turbulence in global financial markets and slowdown in emerging economies.
The world’s third-largest economy is “on a moderate recovery, while weakness can be seen recently,” the Cabinet Office said in its monthly report, a downward revision from last month when it said weakness was seen only “in some areas.”
That is the first downward revision since October last year.
The Cabinet Office adopted a weaker view as personal consumption failed to rebound after a slump late last year and some manufacturers became more cautious.
The move could affect a government decision on whether to go ahead with a consumption tax hike as planned in April next year, though Prime Minister Shinzo Abe has said it will be implemented unless exceptional circumstances occur such as “a sharp contraction in the global economy.”
Abe is currently convening a series of meetings at his office to hear the opinions of Japanese and international experts to assess the state of the global economy and help him make a judgment on the consumption tax.
“Private consumption is almost flat, while consumer confidence appears to be pausing,” the office said. Last month it said private consumption held “firm as a whole.”