Japanese Official Sees Economic Recovery Continuing

Economic and fiscal policy minister said deteriorating business sentiment was caused by weak capital investment by non-manufacturers and possibly weather.

TOKYO (Kyodo) — Economic and fiscal policy minister Hiroko Ota said Tuesday she believes a recovery trend in Japan's economy hasn’t changed significantly, despite some weak indicators released Monday.
''Although we saw some weak indicators recently, I expect a basic recovery trend in the economy will continue,'' Ota said at a press conference following Monday's release of the revised April-June gross domestic product data and a business confidence survey.
Japan's economy shrank an annualized real 1.2 percent in the second quarter of 2007, revised downward from an initially reported 0.5 percent expansion and marking the largest contraction in over four years.
Business confidence among so-called ''economy watchers'' or workers with jobs sensitive to economic trends in Japan dropped in August for the fifth straight monthly decline to hit the lowest level in more than four years.
Ota said the GDP contraction was caused mainly by weak capital investment by non-manufacturers and that the downward movement ''may be temporary.''
The Bank of Japan's latest quarterly Tankan business confidence survey, released early in July, has shown companies' capital spending plans are brisk, and July machinery orders data released earlier Tuesday also indicated robust spending by both manufacturers and nonmanufacturers, Ota said.
Japan's core private-sector machinery orders, considered a leading indicator of corporate capital spending six to nine months ahead, posted their largest growth in July in nearly four years.
As for consumption, Ota said she is ''worried'' about a deteriorating business sentiment as shown in the economy watchers' survey, but stressed that personal spending ''may have been affected by weather factors.''
''I believe consumption has been picking up, but it's still weak enough to be influenced by weather conditions,'' she said.
Ota said production has been weak in Japan, but that she believes output has ''rather hit the bottom'' when repercussions from the major earthquake that hit Niigata Prefecture on July 16 are excluded.
She said inventory adjustments in information technology-related sectors have progressed and production of electric parts and devices has been strong.
On the U.S. economy, Ota said the country's latest payroll data were unexpectedly weak but that capital spending has been firm.
The subprime loan problem has not seriously damaged the U.S. real economy yet, but situations need careful monitoring because firm employment had supported the country's private consumption, she added.
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