Japan Govt Upgrades View: Economy Moving Out Of Temporary Dip

– Japan Govt Upgrades Economic Assessment for 2nd Straight Month
– Japan Govt Upgrades Views On Output, Exports
– Japan Govt Downgrades View On Personal Consumption

TOKYO (MNI) – The Japanese government on Monday upgraded its
overall assessment of the economy for the second straight month, saying
it is set to recover on brighter prospects for production and exports,
overcoming a temporary dip in demand.

In its monthly report for February, the government said, “The
economy shows signs toward picking up, and it is getting out of the
pausing period.”

Last month it said, “Although the economy is pausing, signs toward
picking up are partially seen.” The government began describing Japan’s
economy as “pausing” in October last year.

The upward revision followed the Bank of Japan’s move last week to
upgrade its own assessment of the current economic climate for the first
time in nine months, expecting the economy to move out of what appears
to be a temporary slump in the final quarter of last year.

The government’s upgrade in its February report is largely based on
recent improvement in both industrial production and exports.
In today’s report, the government upgraded a view on exports,
saying, it shows “signs of picking up.”

This is the first upgrading in 16 months. It said in the January
report, “Exports are declining gradually.”

Japan’s export volume rose a seasonally adjusted 3.2% on month in
December, posting the second straight month-on-month rise.
Exports were led by demand from China and other Asian economies.
The index for Asian export volume rose 2.9% m/m to 124.8 in December
against 100 for the 2005 base year.

The government also upgraded its view on industrial production for
two months in a row, saying, it shows “signs of picking up.” Last month
it said output “shows signs of an end to the recent drop.”
Industrial output is estimated by the trade ministry to rise 7.5%
on quarter in January-March.

“Production may be moving out of the soft patch” in the current
quarter, Fumihira Nishizaki, director of macroeconomic analysis at the
Cabinet Office, told reporters.

“Demand for electronic parts and devices used for smartphones has
been strong in both domestic and overseas markets.”
Meanwhile, the government downgraded its assessment of consumer
spending, saying, It is “basically leveling recently.”

This is the first downgrade in three months. Last month it said
consumption is “picking up, but weak signs are partially seen.”
The index for private consumption integrated estimates, which is
closely correlated to personal consumption in GDP, fell 0.8% on month in
December, the first drop in two months.
Sluggish sales of consumer electronics were the main factor behind
the downgrade, said Nishizaki.

Many shoppers rushed to retail stores before Dec. 1, when the
government halved the reward points it offers for buying TVs, air
conditioners/heaters and refrigerators that require less power to
operate.

This has caused a pullback in sales of consumer electronics. Sales
of flat panel TVs, for example, fell 41.1% on year in January, after
marking -50.8% in December and +288.9% in November, according to GfK
Marketing Services Japan.

A drop in year-end bonuses also led the government to downgrade its
view on consumption, Nishizaki said.

But he said automobile sales have hit bottom. Seasonally adjusted
sales of passenger cars whose engine displacement is over 660cc rose
10.6% on month in January, after a 3.1% rise in December and declines of
0.3% in November and 21.3% in October.

Looking ahead, the government said, “There is a risk of economic
downturn, depending on development of overseas economies, foreign
exchange rates and crude oil prices.”

Surges in commodity prices have been caused by strong demand among
emerging economies, monetary easing by industrialized nations, poor
harvests and the unrest in the Middle East.

He also warned that rises in imported commodity prices may drain
wealth out of Japan to resource exporters and hurt corporate profits.
Japan’s longest post-war economic expansion from February 2001 to
October 2007 ended partly due to the worsening in terms of trade sparked
by soaring energy and commodity markets.

Prices of imported crude oil averaged $91.5 a barrel in the first
20 days of January, posting the highest level since $102.7 marked in
October 2008. It hit a record high of $135.7 in August 2008.

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