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Japanese economy recovering but private consumption weak, report says

Japanese economy recovering but private consumption weak, report says

Rising production and capital investment continue to fuel Japan's longest economic expansion since World War II, but private consumption remains sluggish, a government report said Monday.
Also Monday, Bank of Japan Governor Toshihiko Fukui reiterated that the bank will continue to support economic growth by keeping interest rates low, but offered few clues on the timing of the next rate move.
The world's second-largest economy registered its 59th consecutive month of recovery _ nearly five years _ starting from January 2002, according to the Cabinet Office report.
That surpasses by two months the previous record expansion from October 1965 to July 1970, dubbed here as the "Izanagi" economy after an ancient god.
But the report, which looks at a variety of economic factors besides gross domestic product, warned about recent weakness in consumer spending, saying sluggish growth in wages was keeping spending flat.
Domestic demand, which accounts for more than half of the economy, undercut growth in the July-September quarter, forcing the government to downgrade its economic outlook earlier this month.
The Cabinet Office report left its overall assessment of the economy unchanged from the previous month, saying "the economy is recovering, despite some weakness in consumption." Corporate profit and investment are on the rise, while industrial production is increasing moderately and exports remain flat, it noted.
The report echoes concerns that although Japan has emerged from decade-long economic stagnation _ with robust exports contributing to record profits at Japanese companies _ those profits have not driven up wages and spending.
The Japanese economy's recent growth is also far less stellar than the double-digit growth it experienced during the Izanagi era, which coincided with the nation's postwar reconstruction and modernization. The economy grew at an annualized pace of 0.8 percent in the third quarter.
Government officials addressed those concerns later Monday.
"I will work to realize economic growth that can be felt by the general public," Prime Minister Shinzo Abe he told reporters after the report's release.
"The basis for the recovery is solid," economy minister Hiroko Ota said at a separate news conference. A trickle-down of corporate profits to the household sector would occur, albeit slowly, she added.
Still, Abe's government has repeatedly warned the country is at risk of sliding back into deflation _ the spiraling price declines that long undermined corporate earnings and wages. Prices have been slow to recover, with a key price index rising just 0.1 percent in October from a year earlier.
The warnings are generally interpreted as discouraging BOJ from raising interest rates again soon, which officials worry could choke off the country's economic recovery. The central bank raised its benchmark lending rate to 0.25 percent in July, after keeping rates at virtually zero for six years to encourage lending.
"The government and the Bank of Japan will make joint efforts ... to realize sustainable growth based on shared macroeconomic management perspectives," the latest report said.
BOJ governor Fukui said Monday the bank was prepared to help underpin the economic expansion.
"We can keep an accommodative monetary environment led by very low interest rates for some time," Fukui told business leaders at a year-end meeting of the Japan Business Federation, also known as the Nippon Keidanren. "We will tighten monetary policy if economic activity and prices develop in line with our projections."
Keidanren Chairman Fujio Mitarai said he expected strength in the corporate sector to soon trickle down to wages.
"As the economy becomes more robust and corporate performances improve, those effects should cross over to the household sector," said Mitarai, who is also chairman of Canon Inc.


Updated : 2021-08-04 17:56 GMT+08:00