Japan lowers spending view, says overall conditions are severe in Dec report

TOKYO: Japan's government in December cut its view on consumption for the first time in three months, and said overall economic conditions were still severe due to the coronavirus pandemic.

Authorities said the world's third-largest economy is facing increased risks from a resurgence in COVID-19 cases at home and abroad, leading to an outlook downgrade though those remained underpinned by hopes for an economic rebound.

"The Japanese economy remains in a severe situation due to the novel coronavirus, but it is showing signs of picking up," the government said in its December economic report.

But it also warned "full attention" should be given to further risks from the coronavirus and its growing impact on socio-economic activity, a government official said.

Among key economic elements, the government slashed its assessment of private consumption, which accounts for more than half of the country's economy, for the first time since September, saying while it was picking up as a whole, some sectors such as domestic tourism were showing weakness.

Japan's Prime Minister Yoshihide Suga last week abruptly halted a domestic subsidy programme over the year-end after the country saw a resurgence in coronavirus infections.

The official said overall tourism conditions and the temporary halt of the campaign contributed to the lower view on spending, but was also hopeful increased expenditure while staying at home over the year-end such as on food and movie streaming would boost consumption.

Authorities upgraded its view on exports and output, saying a pickup was seen in volume terms especially in shipments of electronic parts to China, though those of cars and transport equipment were less strong than in the previous month.

The government also raised its assessment on bankruptcies and of corporate profits, saying the rate of decline in profits was becoming smaller.

It kept its description of capital spending unchanged to say it continued to decrease.

"Compared to 2018 and 2019, the drop (in capital spending) in the fourth quarter will be quite steep, after firms' investment appetite disappeared," the official said.