Economic Assessment Upgrade

By Satoshi Sugiyama

TOKYO (Reuters) – The Japanese government has upgraded its economic assessment for the first time in over a year due to signs of improved consumption, fostering optimism for a broader recovery.

The Japanese economy is recovering at a moderate pace, although it appears to be still pausing in some areas,” stated the Cabinet Office in its monthly economic report for August. This marks the first assessment change since May 2023.

Consumption is picking up as the impact of shipping stoppages at some automakers eases. The government noted that the increase in household disposable income, alongside temporary cuts in income and resident taxes, has contributed to rising consumption.

However, the extreme heat this summer produced mixed consumption results. Demand for air-conditioning, parasols, and ice cream surged, while customer traffic at theme parks and restaurants decreased.

The report also predicted a decline in import prices, mainly due to a recent correction in the yen’s weak trend.

In the housing sector, the government upgraded its assessment to “almost flat” from “in a weak tone” for the first time in over two years, attributing this change to a halt in the decline of owner-occupied house construction.

Assessments for other sub-sectors, including exports, remained unchanged.

This report was presented at a meeting attended by relevant cabinet ministers and Bank of Japan (BOJ) Governor Kazuo Ueda. Earlier this month, data indicated that Japan’s economy expanded at a much faster-than-expected annualized rate of 3.1% in the second quarter. This rebound, following a slump at the beginning of the year, was largely attributed to a significant increase in consumption.