Tuesday, August 28, 2012

Japan cuts economy assessment as global slowdown bites

TOKYO (Reuters) - Japan's government cut its assessment for the export-reliant economy on Tuesday for the first time since October 2011, as slowing global growth weighed on exports and factory output, and threatened recovery prospects.

Deceleration in the United States and China, on top of Europe's debt crisis, caused the downgrade, the government said, warning that further global slowdown and sharp market swings posed risks to the world's third-largest economy.

The assessment underscores policymakers' worry that fresh stimulus measures could be needed, as exports may struggle to recover before the economy feels the full effects around the year-end from rebuilding following last year's earthquake and tsunami.

"The economy is moderately recovering helped by reconstruction demand, while some weak movements were seen recently," the Cabinet Office said in its monthly report, adding that the recovery will be affected by a global slowdown.

While the previous monthly report had also seen the economy recovering moderately helped by reconstruction demand, it had merely noted that there were difficulties, whereas the latest report's allusion to "weak movements" struck a more negative note.

Flagging concern that personal consumption, which accounts for about 60 percent of the economy, may lose momentum, the government cut its view on private spending, saying it is in a moderately increasing trend, again using a slightly more negative term than a month earlier.

"We used the word trend to show that the pace of increase is slowing. Car sales are leveling off after a rapid increase earlier this year. In addition, poor weather in June has hurt consumption of clothing, beverages and air-conditioners," a Cabinet Office official said.

Japan's growth slowed to 0.3 percent in April-June as a rebound in personal consumption lost momentum and Europe's debt woes weighed on global demand, and economists have trimmed forecasts for Japan's growth in the second half of 2012.

The government cut its view on exports and industrial production, saying shipments overseas are weakening and factory output leveled off recently. In July it said exports were showing signs of recovery and output was recovering moderately.

July trade data had shown the sharpest drop in exports since January, in line with trends seen among other export-driven economies in Asia.

Still, Japan's growth is seen outpacing that of most other G7 countries.

The government lowered its outlook for the world economy, including the United States, Europe, China and other parts of Asia.

Earlier this month the Bank of Japan reiterated its expectations that overseas growth will gradually pick up while warning that there was a high degree of uncertainty over the outlook.

(Reporting by Tetsushi Kajimoto; Editing by Simon Cameron-Moore)

Source: http://news.yahoo.com/japan-cuts-economy-assessment-global-slowdown-bites-000540376--sector.html

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