TOKYO – Japan’s local assessment of the economy has put pressure on exports and industrial production. Due to the global economic slowdown, they have advised companies to cut back on their production until trends pick up. This of course, poses as a problem for manufacturers because that would mean that they will have trouble recovering their investments.
The government said that the worsening situation in the United States and China, in addition to the debt crisis in Europe, prompted the cut. Officials also warned that further global slowdown and sudden changes in market represent risks for the third largest economy.
The evaluation highlights the concern for additional stimulus measures because exporters might struggle to recover. This is before the economy feels the full effect near the end of the year of reconstruction after the earthquake and tsunami incidents last year.
“The economy is recovering moderately helped by the demand for reconstruction. Although some weak movements were seen recently, the Cabinet Office’s monthly report said that the recovery will be affected by the global economic downturn.
While previous monthly reports also saw a moderate recovery of Japan’s economy, new reports state “weak movements”. Analysts foresee this as a warning that the economy may experience some difficulties in the coming months. Given the concern that personal consumption, which corresponds to about 60% of the economy, may lose steam, the government cut its estimate of private spending.
“We use the word ‘tendency’ to show that the rate of increase is slowing. Car sales are leveling off after a rapid increase earlier this year. Additionally, bad weather in June has affected the sales of clothes, drinks and air conditioners ” said an official of the Cabinet Office.
Japan’s economic growth slowed to 0.3% between April and June because of personal consumption recovery lost momentum and the debt crisis in Europe pressured the local demand. Economists have also cut their growth estimates for Japan in the second half of 2012.
The government cut its outlook for exports and industrial production under the pretense that foreign shipments are weakening and that industrial production has stabilized recently. Exports were showing signs of recovery and production dating back moderately in July.
The July trade data showed the biggest drop in exports since January, in line with the trends seen among other export-dependent economies in Asia. However, Japan’s growth would be higher than most G7 countries.
Earlier this month, the Bank of Japan reiterated its expectation that international growth, while gradually improving, still shows high degree of uncertainty when it comes to economic outlook.