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Japan Lowers Economic Assessment

Nation warned of deteriorating exports, output and corporate profits -- signals that may point toward a contraction of the world's second largest economy.

TOKYO (AP) -- Japan painted a darker picture of its economic health Thursday, warning of deteriorating exports, output and corporate profits -- signals that may point toward a contraction of the world's second largest economy.

"The economy is recently weakening," the Cabinet Office said in its monthly economic report for August.

Although it did not include the word "recession," the government notably left out any reference to an economic "recovery" for the first time in more than six years.

The government's increasing pessimism toward corporate performance is a gloomy sign for Japan's economy, which had relied on a robust business sector to drive its recovery. But a slowdown in the U.S. economy is battering Japanese exporters, many of whom depend on the American market for a large part of their business.

The latest report expressed strong concerns about the impact of commodities prices and the U.S. slowdown.

"Attention should be given to further downside risks that could stem from developments in the U.S. economy and stocks, foreign exchange markets and oil prices," the report said.

Earlier in the day, the Cabinet Office reported that core machinery orders -- a key barometer of corporate capital spending -- fell for the first time in three months in June. Core private sector machinery orders, which exclude often volatile orders from electric power firms and those for ships, fell 2.6 percent to 1.085 trillion yen ($9.916 billion) in June from the previous month.

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