Japan Motegi: Moderate Recovery Continues But Need Reforms

     TOKYO (MNI) - The Japanese government's assessment that the domestic

economy is on a modest recovery track remains unchanged after

stronger-than-expected GDP growth in April-June, Economic and Fiscal Policy

Minister Toshimitsu Motegi said Monday.

     He also told reporters that Japan needs to implement structural reforms

amid a fall in the working-age population. 

     Motegi said he doesn't see the need for another fiscal stimulus package at

this point because previous economic stimulus measures are having an impact now.

     Looking ahead, he said, "The economic recovery led by domestic demand is

expected to continue."

     GDP data released Monday showed that Japan's economy for the April-June

quarter posted high growth of 1.0% on quarter, or an annualized 4.0%, as strong

domestic demand -- led by consumption, business investment and public investment

-- offset what is seen as a temporary slip in external demand.

     It was much stronger than the MNI median economist forecast for a gain of

0.7% q/q, or an annualized +2.6%. The sixth straight quarterly expansion in GDP

followed a revised 0.4% rise on quarter (revised from +0.3%), or an annualized

+1.5% (revised from +1.0%), in January-March. The Q2 growth was well above the

potential growth rate that the Bank of Japan estimates somewhere between 0.5%

and 1%.

     Private consumption, which accounts for about 60% of GDP, posted the sixth

straight quarterly rise in Q2, backed by a modest recovery in average wages amid

a tight labor supply and stable fresh food prices. It rose 0.9% on quarter in Q2

after rising 0.4% (revised up from +0.3%) in Q1, coming in stronger than the

median MNI economist forecast for +0.5%. It pushed up the Q2 GDP by 0.5

percentage point.

     "Private consumption showed a good number but it lacks strength," Motegi

said.

     Motegi repeated his recent remarks that the supply side of the economy

needs reforms, such as improving the quality of workers, raising labor

productivity and investing in innovative growth areas.

     Last week the minister also told reporters in a group interview that the

demand side also has room for improvement in the pace of annual wage growth, the

level of minimum wages and the government initiative to implement equal pay for

equal work.

     Motegi replaced Nobuteru Ishihara in a cabinet reshuffle on Aug 3. Prime

Minister Shinzo Abe reappointed some close allies as cabinet ministers but also

distributed ministerial posts to various factions in the ruling party in a bid

to refresh the image of his scandal-plagued administration and cement his grip

on power.

--MNI Tokyo Bureau; tel: +81 90-2175-0040; email: hiroshi.inoue@marketnews.com

--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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