Japan govt upgrades economy view, says deflation easing

TOKYO Tue Jul 23, 2013 8:30am IST

A woman walks past Honda Motor Co's N Box (R) and N One minicars outside at a Honda dealer in Tokyo July 13, 2013. REUTERS/Toru Hanai

A woman walks past Honda Motor Co's N Box (R) and N One minicars outside at a Honda dealer in Tokyo July 13, 2013.

Credit: Reuters/Toru Hanai

TOKYO (Reuters) - Japan's government upgraded its view on the economy for a third straight month in July, saying deflation was easing and growth was picking up due to its policies of aggressive monetary stimulus and generous state spending.

That outlook, which is in line with the Bank of Japan's view, is a boost for Prime Minister Shinzo Abe, who vowed to stay focused on reviving the economy after his coalition won a strong victory in Sunday's upper house election.

"The economy is steadily picking up and it shows some movement towards a self-sustainable recovery," the Cabinet Office said in its monthly economic report on Tuesday.

"Recent price developments indicate that deflation is easing," the report said.

A separate government report said the nation needed long-term fiscal reform to support the recovery and beat deflation, which has strangled the economy for 15 years.

The government upgraded its assessments on capital spending, factory output and business sentiment as confidence recovered and a softer yen helped to boost corporate earnings, which it said should feed through to incomes and investment.

"We need further recovery in firms' capital spending and the income situation" before the recent bright signs in the economy can be termed a clear recovery, a Cabinet Office official said.

Capital spending was "levelling off and shows some movement towards picking up", the report said, while industrial production was "increasing at a moderate pace" and business sentiment was improving.

The economy grew at an annualised 4.1 percent rate in January-March.

FISCAL REFORM

The report on long-term public finances said fiscal discipline was needed to maintain market confidence and prevent a sudden spike in interest rates.

Japan's public debt is already more than twice the size of its 500 trillion yen economy, the largest among major industrialised nations after years of fiscal spending to try to jump-start the stagnant economy, and a planned sales tax hike is considered a test of the appetite for fiscal reform.

The government will decide later this year on whether to go ahead with a scheduled increase in the sales tax rate to 8 percent next April from 5 percent, the first step in a planned a planned doubling of the levy buy October 2015.

Abe has concerns that raising the tax rate could damage the economy. The government report, however, said the experience in Europe was that raising consumption taxes did not necessarily damage growth.

(Reporting by Kaori Kaneko; Editing by John Mair)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Market Eye

Sensex, Nifty rise to second consecutive record high

Sensex, Nifty rise to second consecutive record high

The BSE Sensex and Nifty on Friday rose to their second consecutive record highs. The 30-share Sensex surged as much as 1.52 percent to an all-time high of 27,762.13. The broader Nifty gained as much as 1.49 percent to a record of 8,291.65.  Full Article 

REUTERS SHOWCASE

Ban on E-Cigs?

Ban on E-Cigs?

Govt considers ban on e-cigarettes, sale of single smokes.  Full Article 

Commodities

Commodities

Silver futures in India hit four-year low on global cues.  Full Article 

BOJ Policy

BOJ Policy

BOJ shocks markets with surprise easing as inflation slows.  Full Article 

Cost Cutting

Cost Cutting

PM Narendra Modi boots officials out of the first class cabin  Full Article 

Leisure Riding

Leisure Riding

Harley-Davidson woos affluent young Indians with bike culture  Full Article 

Shadow Banking

Shadow Banking

China's shadow banking sector growing rapidly, third largest in world - FSB.  Full Article 

Moody's on India

Moody's on India

Moody's welcomes India's policy steps, but wants to see more.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage