Japan’s economy is on a moderate recovery path underpinned by solid corporate investment and earnings, but the slowing Chinese economy remains a risk factor, the government said Tuesday.
In the June edition of its monthly economic report, the Cabinet Office maintained its headline assessment that the world’s third-largest economy is “recovering at a moderate pace while weakness in exports and industrial production continues.”
However, a government official said in a briefing that China’s economic slowdown and escalating trade tensions with the United States “continue to warrant caution” in the manufacturing and export segments.
The government’s official view of economic conditions has been attracting attention ahead of the planned consumption tax hike to 10 percent from the current 8 percent in October. There has been speculation that Prime Minister Shinzo Abe may put off the tax increase as economic indicators in recent months have sent mixed signals.
The latest assessment follows a series of positive economic figures, including an upgraded gross domestic product number for the January to March period despite a weak showing for private consumption.
The official said corporate profits and business investment remain firm, in particular among nonmanufacturers, while private consumption is “picking up” and the employment situation is “improving steadily.”
Still, the report warns exports are showing “a weak tone” and industrial production is displaying “a weak tone recently.”
The report drew attention last month when it downgraded its headline evaluation from the previous view that “weakness is seen recently in exports and industrial production in some sectors,” while maintaining the assessment that the economy is “recovering.”
The official said some commodity prices are on the decline due to slowing growth in China and the office changed its expression from the previous month about producer prices from “rising moderately in recent months” to “flat in recent months.”