Japan gov't says economy on moderate recovery path, but investment, exports, production weigh

The Japanese government on Monday left unchanged its basic economic assessment for December from a month earlier, saying the world's third-largest economy is recovering moderately, owing to stable consumer spending and growing business profits.

The latest assessment comes following revised data showing that Japan's economy dodged a recession in the last quarter due to better-than-expected business spending and inventories, although leading economists have warned that the next round of quarterly GDP data will likely be tepid at best.

In its latest assessment, the Cabinet Office said in is report, however, that there is "still weakness in some areas" and downgraded its view of both public investment and housing construction sections.

The government highlighted the fact that the construction of homes in the recording period was largely flat, in contrast to its previous report which pointed to an uptick.

In addition, it said that public investment is declining moderately, as opposed to its previous view that it was showing weakness.

The government also maintained its downbeat assessment of exports, pointing to shipments being hampered by a slowdown in emerging economies and associated concerns. It added that industrial output has weakened recently, a view which is unchanged from last month.

But the employment situation painted a brighter picture, according to the report, which pointed to the unemployment rate here dropping to a 20-year low of 3.1 percent in October, as non-manufacturing companies notably took on more staff.

"We can see clearly improvement continuing in the latest employment data," a Cabinet Office official was quoted as saying, compared to a view from the office a month earlier that employment was trending towards improvement.

Private consumption, a mainstay of the economy, is steady, the report said, in line with its previous assessment, with the government expecting an increase commensurate with a rise in salaries and employment conditions.

While the Bank of Japan's latest Tankan report pointed to issues with corporate profits, with some analysts also confirming that while companies have pocketed robust first half and quarterly profits, due to circumspect outlooks, were not investing the profits into employees' wages, the latest report showed that corporate profits, on a whole, were improving.

The current moderate recovery of the economy is expected to continue, the report surmised, despite some downside pressure from emerging economies.