Japan Govt: Modest Econ Pickup Intact; Weather Impact Mixed

     TOKYO (MNI) - The Japanese government on Monday left its economic

assessment for September unchanged for the third straight month, repeating that

the domestic economy remains "in a moderate recovery" amid mixed effects of bad

weather on consumer spending in August.

     The government also left unchanged its assessment of all the major

components of the economy from consumption and capital investment to exports and

industrial production.

     In June, the government revised up its overall economic assessment for the

first time in six months.

     Looking ahead, the government maintained its outlook that the economy will

continue "recovering moderately," backed by improvement of labor and income

conditions and the effects of fiscal spending.

     It also repeated the risks to its outlook, citing uncertainty in overseas

economies and the effects of fluctuations in financial and capital markets.

     The government repeated that private consumption is "picking up moderately"

and that business investment is "picking up."

     "Summer bonuses were weak but this is partly due to the high growth last

year. The level of bonuses is fairly high, so they are not affecting the income

environment," Hideyuki Ibaragi, director of macro-economic analysis at the

Cabinet Office, told reporters.

     "In August, there was a mixed picture. Lower temperatures and long rainy

days supported sales of autumn clothing while dampening demand for summer

clothing."

     Total monthly average cash earnings per regular employee in Japan fell 0.6%

on year in July, revised down from the 0.3% drop reported in preliminary data,

as the decline in summer bonuses was steeper than initially reported, data from

the Ministry of Health, Labour and Welfare released Friday show.

     It was the first year-on-year drop in 14 months after a 0.4% rise in June,

but government officials argued the gradual uptrend remains intact. Bonuses and

other special pay fell 3.1% in July from a year before, revised down from the

initial reading of a 2.2% drop.

     But base wages, the key to a recovery in cash earnings, rose an unrevised

0.5% in July, the fourth consecutive year-on-year gain, although the pace of

increase slowed from the recent high of +0.7% in May.

     Combined same-store department store sales rose 2.0% on year in August,

posting the first rise in two months after falling 1.4%, as lower temperatures

supported late summer to autumn clothing sales, the Japan Department Stores

Association said Thursday.

     The Cabinet Office's Private Consumption Integrated Estimates index, which

is based on both supply- and demand-side data, posted the first month-on-month

rise in three months in July, up 0.3% after falling 0.6% in June. The index

marked the sixth straight quarterly increase in April-June, up 0.8% on the

quarter after rising 0.4% in January-March.

     The Economy Watchers' sentiment index for Japan's current economic climate

stood at 49.7 in August, unchanged from July, when it posted the first

month-on-month drop in four months on a seasonally adjusted basis

     News of North Korea's threat to launch a ballistic missile toward the U.S.

territory of Guam led to some cancellations of overseas holiday tours, hitting

Japanese travel agencies. Long rainy days in August also dampened the service

sector, including operators of theme parks and golf courses.

     The government also left unchanged its assessment of exports and industrial

production, the key drivers for current modest economic growth, saying they are

both "pickup up."

     Industrial production posted the first month-on-month drop in two months in

July, falling a seasonally adjusted 0.8% in what the government called a

"relatively small reaction" to the strong 2.2% rise in June. The July result was

weaker than the MNI median forecast for -0.4% but production's recovery trend

remains intact amid a gradual pickup in both external and domestic demand.

     Export volumes jumped a seasonally adjusted 3.7% on month in August, the

first rise in three months after falling 0.4%. The increase was led by a rebound

in exports of electronic parts to Asia in the current quarter after a temporary

dip in April-June.

     The average economist forecast for Q3 GDP growth is an annualized 1.33%

rise, down from 2.5% expansion in Q2, according to the latest monthly ESP

Forecast Survey of 42 economists by the Japan Center for Economic Research

conducted from Sept. 4 to Sept. 11. The survey showed economists projected a

gradual slowdown in the GDP growth rate toward 1% from Q3 onward.

--MNI Tokyo Bureau; tel: +81 90-4670-5309; email: max.sato@marketnews.com

--MNI BEIJING Bureau; +1 202-371-2121; email: john.carter@mni-news.com

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