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The
government also slashed its assessment on consumer spending for
the first time in two years, saying a pickup seems to be
"stalling", underlining the challenge for the Bank of Japan as
it looks to exit its ultra-easy policy this year.
The downbeat assessment comes after data last week showed
Japan's economy unexpectedly slipped into recession in the
fourth quarter on weak domestic demand, losing its position as
the world's third-largest economy to Germany.
"The economy is recovering moderately though it appears to be
stalling recently", the Cabinet Office said in its report on
Wednesday. It was the first downgrade since November 2023.
The lower assessment on consumer spending was due to a pause in
recovery in service spending and a fall in spending on
non-durable goods because of factors such as price hikes.
The nation's real wages fell for 21 straight months in December
as inflation outpaced wage recovery and continued to weigh on
household spending.
The suspension of some auto production and shipments prompted
the government to cut its view on industrial output for the
first time since March 2023. It said while industrial output was
expected to pick up "production activity fell recently".
The production stoppage at Toyota Motor's small-car unit
Daihatsu over safety issues have dented the auto output. Toyota
also suspended shipments of some models after finding
irregularities in certification tests for diesel engines
developed by affiliate Toyota Industries.
Recovery in capital spending also appears to be "stalling", the
report said, maintaining the same view from the previous month.
Firms' capital spending plans were solid but their investment
has not been realized partly due to labour shortage, an official
at the Cabinet Office said.
The government repeated it needed to pay "full attention" to an
impact from the earthquake that killed about 240 in Japan's Noto
peninsula on New Year's Day. Analysts have said the earthquake
will have only a small impact on the economy in the short term.
(Reporting by Kaori Kaneko; Editing by Shri Navaratnam)
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