TOKYO (MNI) – The Japanese government said on Monday that it has
upgraded its overall economic assessment for the first time in four
months, saying there are signs of an improvement in production capacity
from the sharp downturn triggered by the March 11 earthquake disaster.

It also presented a slightly brighter outlook but warned that a
further slowing in global economic growth is now a downside risk to a
sustained recovery in Japan.

“Upward movements are observed in the Japanese economy while
difficulties continued to prevail, due to the Great East Japan
Earthquake,” the government said in its monthly economic report for
June.

Last month, when it left its assessment unchanged, the government
said: “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.”

This month, it removed mention of unemployment as the focus is more
on how quickly manufacturers can restore quake-ravaged production
facilities and supply chains, the key to a recovery in exports of cars
and electronics and thus brighter prospects for job creation and wage
hikes.

After the Democratic Party of Japan took power away from Liberal
Democratic Party in September 2009, the DPJ highlighted joblessness as a
key issue to tackle, promising to spur spending by providing free public
high school education and monthly allowances to families with children.

As Japan recovered from the global recession triggered by the 2008
collapse of Lehman Brothers, the labor market had gradually improved
until the massive earthquake and tsunami wrecked northeastern regions.

The latest data showed that Japan’s unemployment rate — national
figures minus the three prefectures hardest hit by the March 11 disaster
— stood at 4.7% in April, up from a two-year low of 4.6% in March, as
job losses continued for the second straight month.

But looking at the longer-term trend, the unadjusted number of
jobless workers was down by 300,000 in April from a year earlier at 3.09
million, marking the 11th consecutive year-on-year decline, after
falling 260,000 in March.

Signs of a recovery are seen in both industrial output and exports
and the worst may be over for consumer spending, said the government.

Industrial production rose 1.6% in April from a month earlier,
rebounding from a record 15.5% drop in March, while the month-to-month
decline in export volume shrank to -5.8% in April from -10.3% in March.

The private consumption integrated index compiled by the Cabinet
Office rose 2.4% in April from the previous month after falling 4.9% in
March, prompting the government to revise up its assessment on consumer
spending for the first time in 15 months.

In the June economic report, the government also upgraded its
short-term outlook.

Reflecting a moderate recovery of overseas economies and the
effects of policy measures, “the economy is expected to resume picking
up as progress is being made in restoring the supply chains, and
production activities are recovering,” it said.

Until last month, it said, “As for short-term prospects, weakness
will continue for a while.”

But the government repeated that power supply shortages in the
summer and nuclear radiation leaks from the quake-hit Fukushima Daiichi
nuclear power plant in northeastern Japan remain as a downside risk to
an economic recovery.

This month, it also noted that a slower global growth could hurt
Japan as emerging economies are also showing signs of a slowdown.

tokyo@marketnews.com
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