Tokyo, July 11 (BridgeNews) - Japan's Cabinet Office (CO) did not change its basic assessment of the overall economy in its July report released Wednesday, saying, "the economy is deteriorating." The CO had revised down its views for five months through June. Although the July economic view was not revised it does not necessarily indicate the economy has bottomed, a CO official said.
Commenting on the outlook of the economy the CO said, "Some concerns, such as rises in inventories and signs of weakening in capital spending, are seen." Since there is no change in the CO's economic view it is less likely that the government will pressure the Bank of Japan to introduce further monetary easing.
State Minister for Economic and Fiscal Policy Heizo Takenaka said on Tuesday that although he would like to attend BOJ's policy board meeting scheduled on Thursday and Friday, he does not intend to propose any changes in the central bank's monetary policy.
The CO downgraded its assessment on corporate profits in the July report, saying, "corporate profits are hitting a ceiling," while it had said, "corporate profits, which showed high growth so far, are slowing" in the June report.
Recurring profits of all industries are expected to fall 7.5% on the year in the first half of this fiscal year, after posting increases of 30.0% and 9.4%
in the first and second halves of fiscal year 2000-2001 (April-March), according to the BOJ's quarterly business survey on corporate sentiment for June known as the "tankan."
The CO changed its assessments of corporate sentiment and employment as follows, but such changes do not represent downward or upward revisions, the CO said.
--CORPORATE SENTIMENT: "Corporate sentiment continued to deteriorate, led by manufacturers," the CO said in the July report, while it had said, "Corporate sentiment is rapidly deteriorating, led by manufacturers" in its June report. Haruhiko Arai, a senior CO official in charge of compiling the report, said manufacturer sentiment continues to worsen, but the pace of deterioration is slowing. The major manufacturers' diffusion index (DI) fell to -16 in June, worsening by 11 points, compared with the March DI, which had deteriorated by 15 points.
--EMPLOYMENT: "Employment remains severe as seen in the unemployment rate which remains at a record high level. Steadiness is seen partially (in job data), but weak movement is seen in manufacturers," the CO said in the July report.
In the June report it had said: "Employment remains severe. The unemployment rate remains at high levels, and both job offers and overtime working hours are weakening" in the June report. Arai pointed out the unemployment rate stood at a record high of 4.9% in May, up from 4.8% in April, but the number of employed workers continued to rise on the month in both April and May.
Meanwhile, the CO has not changed its assessment on personal consumption, the largest component of the Japan's gross domestic product, repeating, "Consumption has basically continued to level, but its weak movement can be seen recently" in the July report.
Arai also said the negative impact of a new law promoting the recycling of large electric appliances, which took effect April 1, was not so significant.