Japan keeps economy assessment unchanged, frets about quake impact

By: |
Tokyo | April 21, 2016 2:21 PM

The government said companies have become cautious, which was a downgrade from last month when it said corporate sentiment was more or less flat.

JapanIndustrial production could dip in April but return to growth the following month as long as more companies restart production. (Reuters)

Japan’s government kept its assessment of the economy unchanged this month but said it was still analysing the impact of earthquakes over the weekend that damaged homes and halted production in the southern manufacturing hub of Kumamoto.

The government also lowered its assessment of corporate sentiment after the Bank of Japan’s tankan survey showed companies became less optimistic about business conditions in the first quarter.

Some economists say Japan is likely to quickly shake off the impact of the earthquakes, but there is lingering speculation that Prime Minister Shinzo Abe could call off a sales tax hike scheduled for next year to focus on bolstering domestic demand.

“Japan’s economy remains on track for recovery, but more weak spots in the economy can be seen,” the Cabinet Office said in its monthly economic report on Thursday.

That was unchanged from last month’s assessment, which the government downgraded for the first time in five months due to weakness in consumer spending.

The government kept unchanged its assessment of consumption this month to say consumer spending is flat and that consumer sentiment is stalling.

The government said companies have become cautious, which was a downgrade from last month when it said corporate sentiment was more or less flat.

Japanese automotive chipmaker Renesas Electronics Corp said it will resume partial production at its Kumamoto plant on Friday, offering hope that companies can quickly bounce back from the earthquakes.

“We need to be mindful of the impact that the Kumamoto earthquake and increased seismic activity could have on the economy,” the Cabinet Office said.

Industrial production could dip in April but return to growth the following month as long as more companies restart production at electronics and auto parts factories in Kumamoto, some economists say.

Japan’s top government spokesman has said the earthquake does not change Prime Minister Shinzo Abe’s plan to raise the nationwide sales tax next year to 10 percent from 8 percent to pay for welfare spending.

Still, there is lingering speculation that Abe could delay the tax hike to focus on boosting domestic demand before elections later this year.

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