Japan government keeps 'moderate' economic view in September

TOKYO (Reuters) – Japan’s government kept its view that the economy is recovering at a moderate pace in September, but flagged persistent weakness in the country’s export sector, according to a monthly economic report released by the Cabinet Office on Thursday.

Weakness in the global economy and a bitter trade dispute between the United States and China have sparked a nine-month decline in exports, posing major risks to Japan’s economy, the world’s third-largest.

The government left its assessment of most of the individual components of economic growth unchanged, offering a generally positive view of domestic demand ahead of a sales tax hike scheduled for October.

However, the housing sector was downgraded for the first time in more than one-and-a-half years due to a decline in new home construction.

The government retained its view that corporate profits held at a high level, as long-term strength in services-sector firms offset less rosy performance in the manufacturing sector.

It also kept its assessment that capital expenditure was expanding at a moderate pace despite some weak spots in spending by manufacturers, a Cabinet Office official told reporters.

Japan’s economy has grown for the past three quarters, though the pace was slower than initially estimated in April-June as business spending was downgraded, revised data showed last week.

The government’s assessment on Wednesday aligns with data from past months that shows strength in domestic demand such as private consumption offsetting external headwinds.

Through the first half of September, there were few signs that consumers were front-loading spending ahead of the sales tax hike to 10% next month, the government official said.

The previous tax hike to 8% from 5% in April 2014 hit consumer confidence and triggered an economic slump.

The government revised down its assessment of the economy twice this year, in March and May.