MNI: Japan Sees Modest Economic Recovery Despite Soft Spots

By Max Sato

     TOKYO (MNI) - Japan's government on Wednesday left its overall economic

assessment for February unchanged from the previous month, saying the economy is

"recovering moderately" despite slower exports to the U.S. and what it sees as a

temporary dip in consumption caused by bad winter weather.

     In January, the government upgraded its assessment for the first time in

seven months, noting the modest but sustained economic recovery is supported by

both the corporate and household sectors.

     --WATCHING YEN IMPACT

     The recent appreciation of the yen has not had any major dampening effects

on the economy, "but we will keep a close watch," Hideyuki Ibaragi, director of

macro-economic analysis at the Cabinet Office, told reporters.

     The government maintained their views on key components of the economy:

private consumption and exports are "picking up" while business investment and

factory output are "increasing moderately."

     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

drop in two months in December, down 1.0%, after rising 1.5% in November but it

rose 0.5% on quarter in October-December.

     The prices for consumer electronics and appliances including TVs, washing

machines and air conditioners/heaters have been rising steady in light of the

introduction of high-tech products while per-customer sales at restaurants have

been also increasing, Ibaragi said.

     --TEMPORARY DIP

     Freezing temperatures and heavy snowfalls, combined with rising fuel and

food prices, hammered many Japanese regions, hurting sentiment in various

sectors, a key government survey released on Feb. 8 showed.

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

climate 4.0 points to a six-month low of 49.9 in January on a seasonally

adjusted basis after slipping 0.2 point in December.

     It was the second straight month-on-month drop and the largest fall since

April 2014, when the index plunged a whopping 15.7 points to 38.4 after the

sales tax was raised to 8% from 5% that month, causing a prolonged slump in

consumption.

     But Ibaragi said the bad weather effects were "temporary" in January. He

added that he was monitoring how continued heavy snowfalls in some regions and

the lingering low temperatures across Japan would affect economic activity in

February sentiment surveys.

     "There are trade-offs in the cold weather," he said, noting that sales of

heaters have been strong.

     January retail sales are due on Feb. 28 and January household spending on

March 9. 

     --OVERALL EXPORTS UP

     On external demand, the government said Japan's overall exports were

"picking up" despite slowing automobile exports to the key U.S. market.

     It downgraded its view on exports to the U.S., which are now "largely

flat," instead of picking up.

     The three-month moving average of volumes of Japanese exports to the U.S.

fell 0.3% in January from the previous three-month period while that of overall

Japanese export volumes rose 1.3%.

     Japanese auto exports to the U.S. increased at a fast pace in the first

half of 2017, when Japanese carmakers' supply of SUVs caught up with strong

demand, but the pace of growth has slowed, Ibaragi explained.

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

continue "recovering moderately," backed by an improvement in 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.

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

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