Daily Management Review

Japanese Govt. Downgrades Its View On Its Economy As China Slows Down


Japanese Govt. Downgrades Its View On Its Economy As China Slows Down
The Japanese government has, for the second time in the last three years, downgraded its headline assessment of its economy on Wednesday because of factors such as a cooling down of exports into China because of a slowdown in the Chinese economy. The Japanese government however refused to say that the economy had fallen into recession.
The world’s third-largest economy is “recovering at a moderate pace while weakness is seen recently in exports and industrial production in some sectors,” said Japan’s Cabinet Office in the March edition of its monthly economic report.
The report clearly brought down its expectations from the Japanese economy which it had earlier assessed is on a path of recovery and was moving along at a moderate pace. That position about the economy had been maintained by the Japanese government since January last year. The only other time in the last more than three years that the view and outlook on its economy was downgraded by the Cabinet Office was back in March of 2016.
However, it also believes that the phase of growth in the economy that started back in December 2012 is still continuing unabated and the economy was based on robust indicators including a solid private consumption scenario and capital expenditures. According to the latest report of the Cabinet Office and a government official present at the press briefing, those two components of the economy account for almost 70 per cent of the total gross domestic product of the country.
Economists however pointed to a key indicator of economic trend released earlier this month which showed indications that the Japanese economy could have peaked already last fall and that the economy has since then entered into a recessionary phase. This view is primarily cited by strong government critics who blame the Shinzo Abe government of being over optimistic.
But according to experts, the answer to the question about whether the growth phase of the economy in the most recent time had managed to surpass the Izanami Boom from 2002 to 2008 is not possible to be answered by either the assessment made by the Cabinet Office nor the indicator or the coincident index of business conditions.
Many believe that answering that question can primarily and best be done by a seven-member panel of academics and private-sector economists who are tasked with retrospective determination of the duration of economic cycles after close scrutiny of more data and such an effort can take as much as year to get completed and an answer reached at.
Saying that it is “almost flat, and weakness is seen in some sectors”, the assessment of industrial production by the Cabinet Office was downgraded by it in its latest report.
It said exports had a “weak tone” while private consumption is “picking up” and business investment is “increasing,” which were the same as they had opined in their report the previous month.
The report said that in the near future, close attention needs to be paid to the outcome of the trade war between the United States and China and the outlook of the Chinese economy given that the economic growth in the second largest economy of the world has slowed to a nearly three-decade low.