TOKYO (AFX-ASIA) - The Cabinet Office left unchanged its key economic assessment, saying the economy continues to deteriorate amid sustained falls in capital expenditure, exports and industrial output. "The economy continues to deteriorate," the Cabinet Office said in the August economic report, put forward to the cabinet this afternoon. In the previous report, the Cabinet Office asserted that the economy "is further deteriorating".
Cabinet Office economist Haruhito Arai said the agency simply "highlighted" the durability of the deterioration by changing its wording slightly, as recent economic data did not suggest any change in the pace of the decline.
Arai said the recently released GDP data for the second quarter to June, which showed the economy contracted by 0.8 pct quarter-on-quarter, did not affect the assessment in August. "The data simply endorsed the severe state of the economy," he said.
The Cabinet Office, meantime, warned of the risk of a "further slowdown" of the global economy on the future of the already flagging economy in Japan.
However, Arai stressed that this warning did not refer to any adverse effects on the global economy following the multiple terrorist attacks in the US.
The impact of the attacks on "the global capital markets and crude oil price needs to be monitored closely", he said.
In the August report, the Cabinet Office emphasized continued pressure in the corporate sector and its spill-over impact on households.
"The unemployment rate has reached a record high of 5.0 pct, while job offers and overtime hours worked are continuing to weaken," it said.
However, Arai said the rise in unemployment does not mean the extent of the deterioration in the labour market has changed. The agency maintained its assessment on the trend of private consumption, saying that it "has remained broadly flat, with weakness in some data."
"Household spending data showed some rebound, while supply-side data, such as retail sales, continued to underscore the weakness," Arai said.
The Ministry of Public Management, Home Affairs and Telecommunication recently said seasonally-adjusted household spending rose 1.5 pct in July from the previous month. But the Ministry of Economy, Trade and Industry said July retail sales fell 0.6 pct from the previous month.
Elsewhere, the agency said "business investment is falling", adding that "exports and industrial production have fallen substantially." All assessments here were left unchanged from the previous month. The Cabinet Office noted some improvement in levels of inventories in the August report but Arai questioned the sustainability of such a development.
"Since the fall in inventory levels was due to good sales of air conditioners amid extremely hot summer conditions, we are unable to conclude that inventory has entered a falling cycle," he said.