TOKYO, Dec 19 (Reuters) – The Japanese government revised down its view on public investment but largely kept its overall outlook on the economy intact in a monthly report published on Friday.
In its monthly economic assessment, the government reiterated a cautiously optimistic view that the world’s fourth-largest economy is recovering moderately, while warning of downside risks from U.S. trade policies especially on the auto industry.
The government also restated its caution about the negative impact of stubborn inflation on private consumption and flagged the necessity to be mindful of market movements.
The report comes as the Bank of Japan on Friday raised its key interest rate to 0.75% from 0.5% at a policy meeting, the highest level in three decades.
The Cabinet Office downgraded its view on public investment for the first time in 13 months, as the bump from last year’s supplementary budget has waned.
The government kept its view on private consumption, which accounts for more than half of the economy, saying it showed signs of “picking up” for a fourth consecutive month.
The Cabinet Office similarly did not change its view on exports, adding that while U.S.-bound automobile export prices have recovered slightly from the decline following the U.S. tariff increases, they remain at low levels.
“Regarding exports to China, we are seeing weakness, reflecting the softness of China’s domestic demand,” a Cabinet Office official said.
Japan’s economy contracted in the three months through September primarily due to new data dragging down capital spending figures.
Although U.S. tariffs are likely to pressure exports, economists said the Japanese economy is likely to return to growth in the next quarter, anchored by a slow recovery in private consumption.
(Reporting by Satoshi Sugiyama; Editing by Sam Holmes)
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