TOKYO (MNI) – The Japanese government on Thursday left its overall
economic assessment unchanged in its monthly report for November after
downgrading it last month, but it also warned about growing downside
risks due to the European debt crisis and the flooding in Thailand.
“The Japanese economy is still picking up slowly, while
difficulties continue to prevail due to the Great East Japan
Earthquake,” it said.
Looking ahead, it repeated: “Reflecting the supply chain recovery
(from the earthquake) and the effect of policy measures, the Japanese
economy is expected to continue to pick up.”
But the government warned that Japan’s export-led recovery faces
more downside risks — the strong yen and weaker share prices triggered
by the European sovereign debt crisis and the supply chain constraints
caused by the major flooding in Thailand, a key Southeast Asian
production center fro Japanese car and electronics makers.
Japan had already faced constraints on the supply of electric power
as a consequence of the Fukushima nuclear accident as well as the
continued slowing of overseas economies.
Hit by the massive flooding in Thailand, Japan’s exports to the
country posted the first drop in three months, down 5.1% in October
after rising 16.1% in September.
“Some effects of the Thai flooding will be seen in industrial
output, particularly in the automobile sector, in November,” said
Shigeru Sugihara, director of macroeconomic analysis at the Cabinet
Office,
The government did downgrade its view on capital investment.
“Business investment is leveling off while weak movements have been seen
recently.”
“We cannot be optimistic” about capital investment, Sugihara said,
noting that core machinery orders, a leading indicator of capex, are
expected to fall 3.8% in October-December from the previous quarter,
which would be the first drop in four quarters.
Consumer prices are “falling gradually,” the government said.
The remaining large negative output gap caused by excess supply and
slack demand as well as lower import prices due to the strong yen are
exerting downward pressures on CPI, Sugihara said.
tokyo@marketnews.com
** Market News International Tokyo Newsroom: 81-3-5403-4833 **
[TOPICS: M$J$$$,M$A$$$,MAJDS$,MGJ$$$]
