RPT: MNI POLICY: Japan Govt Cuts Econ View;Recovery; Weakness

--Japan Government's Downward Revision First Since March 2016

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

Wednesday, saying that the Japanese economy is recovering at a moderate pace

"while weakness is seen recent in exports and industrial production in some

sectors."

     But the government didn't think the economic recovery has stalled, an

official at the Cabinet Office said.

     Back in February, the government simply said, "The Japanese economy is

recovering at a moderate pace." The downward revision is the first time since

March 2016.

     The government also lowered its assessment of industrial production for the

second straight month, saying, "Industrial production is almost flat", although

weakness is seen in some sectors. The previous assessment was "Industrial

production is increasing moderately" and weakness is seen in some sectors.

     The government also lowered the near-term outlook for the economy modestly,

but maintained an optimistic view, saying, "Weakness remains for the time being

in some sectors" 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 it must pay attention to "the effects

of situations over trade issues on the world economy, the prospect for China's

economy, the uncertainty of situations and policies in overseas economies and

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

     --INCONSISTENT WITH DATA

     The government's decision to keep the wording "economic recovery" isn't

consistent with Japan's composite index of business conditions, which decreased

by 2.7 points from December to 97.9 points in January.

     The index carries weight in government decisions as to whether the economy

is growing or has gone into recession.

     The overall assessment of the index was downgraded from the previous

month's "weakening" to "signalling a possible turning point," the middle one of

five stages.

     The same expression was used in November 2014, when a consumption tax hike

was negatively impacting consumer spending, and the phrase suggesting an

economic trend had peaked several months earlier.

     The Cabinet Office official said, "The slowing China economy is lowering

(Japan's) exports and weak exports are filtering through to production. But the

GDP showed that both capital investment and private consumption remained solid

and we maintain the assessment of a moderate economic recovery."

     The government left its assessment of overseas economy unchanged in March

from the previous month, saying, "The global economy is recovering moderately as

a whole, although some weakness is seen in Asia and Europe."

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

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