AP News, April 16th, 2007
Japan raised its assessment of consumer spending for the first time in over a year and a half, saying in its monthly report released Monday that a long-awaited pickup in spending is now in place.
But the government report also downgraded the outlook for industrial production for the first time in more than two years, and left its overall economic assessment unchanged.
"The economy is recovering, despite weakness in industrial production in some sectors," the Cabinet Office said in its April report, deleting the phrase "despite some weakness in consumption" used in its previous assessment.
The change brings the government's economic assessment closer to the bullish view of consumption held by the Bank of Japan.
The BOJ has said for many months that consumer spending, which accounts for more than half of Japan's gross domestic product, is recovering as the economy emerges from a state of downward spiraling prices known as deflation.
However, the downgrade in the assessment of factory production suggests that the government will likely continue to pressure the central bank go slow in tightening monetary policy. The central bank raised its key interest rate a quarter point to 0.5 percent in February.
Behind the upward revision of consumer spending _ the first since August 2005 _ was an improvement in recent consumption data.
Personal consumption rose a seasonally adjusted 1.0 percent on month in February, following a 1.3 percent increase in January, according to the Cabinet Office's own estimates based on consumption-related indicators.
The report said private consumption was "showing a pickup," better than the expression it had used in previous reports: "private consumption is almost flat."
But the report said that "industrial production has flattened recently." The Ministry of Economy, Trade and Industry said Monday that industrial production in February rose a revised 0.7 percent from January, compared with a preliminary 0.8 percent increase.
Still, the government remained upbeat about the near-term economic outlook despite concerns over a possible downturn in the U.S. economy.
"As for short-term prospects, economic recovery is expected to continue supported by domestic private demand as high corporate profits feed into the household sector," the report said.
