TOKYO (MNI) – The Japanese government on Tuesday maintained its
overall economic assessment after making the first downward revision in
six months in April.

“The economy shows weakness recently, due to impact of the Great
East Japan Earthquake. It remains in a difficult situation, with a high
unemployment rate,” the government said in its monthly economic report
for May.

It said in April, “Although the economy was picking up, it shows
weakness recently, due to impact of the Great East Japan Earthquake. It
remains in a difficult situation, with a high unemployment rate.”

Looking ahead, the government repeated, “As for short-term
prospects, weakness will continue for a while.”

It added that nuclear radiation leaks from the quake-hit Fukushima
Daiichi nuclear power plant in northeastern Japan remain as a downside
risk to an economic recovery.

Shigeru Sugihara, director of macroeconomic analysis at the Cabinet
Office, told reporters, “We have not judged the economy has entered a
downturn yet.”

He said that the government has kept the assessment unchanged
because key economic indicators — consumer spending, exports and
industrial output — haven’t shown any major changes after being hit by
the March 11 earthquake disaster.

“A gradual improvement can be seen in output” as firms are
restoring their production capacity, which was either damaged by the
quake or reduced by rolling blackouts in eastern Japan, he explained.

According to a survey conducted by the Ministry of Economy Trade
and Industry, industrial output is expected to have risen 3.9% m/m in
April and to increase 2.7% in May, after showing a record 15.5% plunge
in March.

As for net exports, Sugihara said, “The deficit in the goods and
services account may linger for now” as exports are expected to continue
falling due to supply chain disruptions while imports could be pushed up
by increased purchases of liquified natural gas used for thermal power

Some of power firms have restarted operations of idle thermal power
plants to cope with power shortages caused by suspended operations of
nuclear power plants.

Meanwhile, the government revised down its assessment of capital
investment, housing investment and corporate profits.

Sugihara said shipments of capital goods have been suspended by the
quake, delaying business investment in equipment. Seasonally adjusted
shipments of capital goods, excluding transportation vehicles, fell
13.9% m/m in March, after rising 8.2% in February.

But he said, “The latest machinery orders data have indicated
firms’ positive stance for capital investment has not been weakened.”

Core private-sector machinery orders rose a seasonally adjusted
2.9% m/m in March, much stronger than the consensus call of -10.0%, and
they are expected to rise 10.0% q/q in April-June, accelerating from
+3.5% in January-March.
** Market News International Tokyo Newsroom: 81-3-5403-4833 **

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