MNI POLICY: Japan Govt Cuts Econ View; Still Says 'Recovering'

--Government's Downward Revision 1st Since March 2019

--Govt Also Cuts Assessment of Capex, Production

     TOKYO (MNI) - Japan's government on Friday downgraded its overall economic

assessment from the previous month, now saying that the economy is recovering at

a moderate pace "while weakness in exports and industrial production continues."

     The downward revision is the first since March.

     The government's decision to keeping the word "recovering" is due to the

solid economic fundamentals from labour and income conditions, a Cabinet Office

official told reporters.

     "Japan's exports are weakening in the wake of the slowing of China's

economy and weakness in manufacturers is prominent," the official said. "We need

to pay attention to their developments but domestic demand, (capital investment

and private consumption), will not worsen immediately," the official added.

     The official also downplayed the impact of the weak exports on the overall

economic assessment, saying that exports account for  about 18% of Japan's gross

domestic product.

     The government also lowered its assessment of capital investment for the

first time since September 2016 and industrial production for the first time

since March 2019 in the wake the slowing China's economy.

     "Business investment is on the increase at a moderate pace, while weakness

is seen recently in machinery investment," the government said.

     Previously, the government said, "Business investment is increasing."

     It also said, "Industrial production is in a weak tone recently." The

previous assessment was industrial production was "largely flat, although some

weakness is seen."

     As for the near-term outlook, the government maintained its optimistic

view, saying, "Weakness remains for the time being, but the economy is expected

to continue recovering, supported by the effects of the policies, while

employment and income situation is improving."

     However, the government warned that "further attention" should be given to

the effects of situations over trade issues on the world economy, while the

prospect of the Chinese economy, the uncertainty of situations and policies in

overseas economies and the effects of fluctuations in the financial and capital

markets also need attention.

     The latest GDP data showed that Japan's economy posted an unexpected second

straight gain in the January-March period, up 0.5% on quarter, or an annualized

+2.1%, boosted by stronger net exports and firm private demand.

     Against that, the government on May 13 said its key composite index of

economic indicators show Japan's economy "worsening" for the first time in more

than six years, increasing the risk that Japan's economy may have entered a

recession.

     The Cabinet Office used the weakest of its five expressions for assessing

the key index in describing the economy as "worsening," wording last used

between October 2012 and January 2013.

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

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