TOKYO (Reuters): Japan’s government on Friday raised its assessment of the economy for the first time in seven months, saying growth is showing signs of picking up with factory output bottoming out and exports supported by firm demand in Asia.
The revision is in line with mounting confidence among analysts and within the Bank of Japan that the economy will avoid a double-dip recession and may achieve a relatively quick escape from its current lull.
“The economy is at a standstill but is showing some signs of a pickup,” the government said in its monthly economic report for January. The previous month’s report said simply that the economy was at a standstill.
Economics Minister Kaoru Yosano said the slight upward revision was due to some bright signs that were emerging in the automobiles sector. But he remained cautious about the outlook because the economic environment is something that can change easily.
“I don’t think there will be any big change until the next monthly report comes out,” Yosano told a news conference after a meeting with other cabinet members.
Analysts believe Japan’s economy contracted slightly in the final quarter of last year but expect it to bounce back modestly in the current quarter as factory output picks up.
“There is no change to our view that the economy remains in a lull. But auto sales and production have been showing signs of bottoming out,” Fumihira Nishizaki, director of macroeconomic analysis at the Cabinet Office, told reporters.
The government, however, warned of downside risks to the outlook such as a possible slowdown in overseas economies and fluctuations in currency markets that could hurt the export-reliant economy.
Yosano said Japan’s recovery will depend on steady economic growth in emerging economies and western countries in the near term.
The BOJ will review its long-term economic and price forecasts at its rate review next week. It is expected to tweak its growth forecasts slightly but keep monetary policy on hold, while sticking to its view that firm demand in Asia will pull the economy out of stagnation in a few months’ time.
In the monthly report, the government upgraded its assessment on industrial output for the first time since June 2009, saying it was showing signs of bottoming out.
Last month’s assessment stated that output was falling, but official data has since shown that industrial production rose in November for the first time in six months.
The government maintained its view that exports were decreasing moderately and business sentiment remained cautious.