13 February 2002, 12:35 Japan Cabinet leaves assessment unchanged; economy continues to deteriorate
TOKYO (AFX-ASIA) - The Cabinet Office maintained its assessment of
the economy in February, saying it continues to deteriorate on weak
corporate capital spending and employment, and also citing financial
market worries.
The government will carefully monitor the key indicators of capital
investment, as well as conditions in the financial markets, it added.
The office upgraded its assessment of industrial production to "a
slower pace of decline" from the previous month's "sharp decline" on
progress in inventory adjustments by makers of IT-related products,
particularly LCDs.
It also raised its assessment of imports, citing a "slower pace of
decline", compared with the previous reference to a "declining trend."
"The decline in imports slowed in February ... due to increased
imports of foods -- such as poultry due to the outbreak of mad-cow
disease -- and electronic machinery such as microchips and PCs," an
official said.
The assessment that exports show signs of bottoming out was left
unchanged, though the official noted that the recent improvement in car
exports is tailing off as makers cut back on special zero-interest
financing deals in the US.
"Car exports to the US and Europe dropped, with exports to the US
falling off as zero-interest rate campaigns are reduced, and exports to
Europe declining as Japanese carmakers increase local production," he
said.
The Cabinet Office said Japan should benefit from improvements in
overseas economies, as well as the weaker yen, though this will likely
be offset by the worsening situation at home.
"External conditions are expected to improve as the US economy and
some economies in Asia are showing signs of bottoming out," it said.
The assessment of goods and services prices was upgraded to
"falling" from the previous judgement that the fall in prices was
worsening, partly due to the recent weakening in the yen.
"On the other hand there are concerns over downward pressure on
private demand that may result from the severe employment and wage
conditions, as well as capital market developments," the office said.
The Cabinet office maintained its assessment of private
consumption, saying that it is "weakening", due to the poor employment
situation.
"The climate surrounding household income and consumer confidence
is not seeing a large improvement," the official said.
"Though new car (sales) increased in December, helped by the
introduction of new models, they were mostly (cheaper) minicars that
weigh on the value of consumption," he added.
The employment and household income assessments were also
maintained.
"The severity of employment conditions is increasing, with the
jobless rate rising to a high level, while overtime, wages and job
offers remain weak," the office said.
"Employment conditions have become increasingly severe, with
unemployment rising to a new record of 5.6 pct. Salaries remain below
the previous year's level and continue to weaken, with bonus payments
also falling."
The Cabinet Office also attributed its decision to leave its
overall economic assessment unchanged, despite the improvement in
industrial output, to concerns over the situation in financial markets.
"The office maintained its assessment that the domestic economy is
not expected to improve because of mounting concerns over the worsening
of financial market conditions," the official said.
He cited the recent rise in long-term interest rates to around 1.5
pct, that may affect the rates paid on borrowing by companies, as well
as the fall in the benchmark Nikkei 225 stock index to below 10,000
points in January.
"We need to carefully watch the movements in the financial
markets," the official said.
© 1999-2024 Forex EuroClub
All rights reserved