TOKYO: The Japanese government downgraded its basic economic assessment in a monthly report released Wednesday, citing weaker private consumption.

“The Japanese economy is recovering at a moderate pace, although it recently appears to be pausing,” the Cabinet Office said in the February report. In January, it said that economic recovery “appears to be pausing in part.”

The government last revised down its basic economic view in November.

Its assessment on private consumption, a pillar of domestic demand, was revised down for the first time since February 2022, with the report saying that the pickup in consumption “appears to be pausing.”

A Cabinet Office official cited as one reason behind the downgrade a lull in the post-pandemic recovery of services consumption, such as spending on travel and accommodation.

The official also said that weaker consumption of some goods, including clothing due to the warm winter and automobiles following production suspensions at some automakers, also weighed down on the assessment.

Despite the lower view on private consumption, “The momentum of (overall economic) recovery itself is being maintained, as the pause is likely to give way to a further climb” thanks to slower inflation and expected wage hikes at this year’s “shunto” spring wage talks, he said.

The government also revised down its view on industrial production, saying that while it was headed for a pickup, manufacturing activities have “declined recently due to the effects of suspension of production and shipment by some automotive manufacturers.”

Some auto plants were halted late last year and earlier this year due to scandals involving fraudulent tests at Daihatsu Motor Co. and Toyota Industries Corp.

Meanwhile, production of electronic parts and devices is recovering, the Cabinet Office official said.

The assessments for all other categories, including business investment, were kept intact.

The report said the pickup in business investment “appears to be pausing.” The official said that a lack of electricians and other skilled workers was behind sluggish investment despite high corporate appetite for it.

The government maintained its outlook that the country’s economy is “expected to continue recovering at a moderate pace with the improving employment and income situation,” and that full attention should be given to the economic impact of the magnitude -7.6 earthquake that struck central Japan’s Noto Peninsula on New Year’s Day.

JIJI Press