Japan retains economic view for July, but warns of possible lull+

TOKYO, July 21 Kyodo -
The government on Wednesday retained its monthly economic assessment for July
but warned there is a possibility that the world's second-largest economy may
hit a lull as downside risks have emerged in the United States on top of
Europe, which has been riddled with sovereign debt woes.
''Although the economy has been picking up steadily and the foundation for a
self-sustaining recovery is being laid, it remains in a difficult situation
such as a high unemployment rate,'' the Cabinet Office said in its monthly
report, retaining the assessment after a modest upgrade in June when the word
''recovery'' was used for the first time in two years.
The July report also added the United States to the phrase ''attention should
be given to the risks that the (Japanese) economy is depressed by a possible
slowdown in overseas economies, especially in Europe,'' on the heels of the
recent release of soft U.S. economic data.
''The (Japanese) economy may be temporarily at a standstill, but I don't see
that it has entered (an extended) lull yet,'' Economy and Fiscal Policy
Minister Satoshi Arai told a press conference following a meeting of ministers
concerned.
But Arai, who doubles as national policy minister, warned that there are
lingering risks that the economy could hit a lull depending on the situation in
the United States or Europe and developments there need to be closely watched.
While acknowledging that some recent economic data in Japan have shown signs of
a slowdown, Cabinet Office Parliamentary Secretary Keisuke Tsumura said the
figures were almost flat when converted to a quarterly basis, leading the
government to leave the overall assessment unchanged.
Speaking at a separate press briefing, however, Tsumura also warned, ''It has
been one step before the recovery enters a self-sustaining phase and no
progress has been made from there.''
During the meeting, Bank of Japan Deputy Governor Kiyohiko Nishimura was quoted
by Tsumura as saying that it could be said the recent appreciation of the yen
reflects the view overseas that Japan's real economy is relatively stable as
well as investor concern about the economic outlook for Europe and the United
States.
Among specific components, the government revised its assessment of business
sentiment for the first time in three months, saying, ''Firms' judgment on
current business conditions is improving. However, firms, especially small and
medium-sized enterprises, are cautious about the immediate future.'' The
previous report had said only that small and medium-sized firms were cautious.
Tsumura said the revision was made as some data indicated that business
confidence at certain major firms, such as automobile manufacturers, is
expected to deteriorate in the months ahead.
Assessments of all the other components were left unchanged.
Exports are ''increasing moderately,'' while industrial production is ''picking
up.''
Labor conditions remain ''severe'' but ''movements of an incipient recovery can
be seen recently,'' it said.
Consumption is also ''picking up,'' the report said.
The government last used ''recovery'' in its July 2008 report, saying, ''While
the economic recovery appears to be pausing, weak movements have been seen
recently.''
==Kyodo
2010-07-21 22:58:32