Japan government keeps moderately upbeat view on economy in August

TOKYO (Reuters) – Japan’s government maintained its moderately optimistic view on the economy on Monday, signaling that a pick-up in private consumption and capital expenditure was underpinning a solid economic recovery.

In its monthly economic report for August, the government also offered a slightly more upbeat view on public investment compared with a month ago, reflecting an increase in public works projects financed by last year’s supplementary budget.

“Japan’s economy continues to recover moderately as a trend,” the Cabinet Office said in the report, maintaining the assessment for the third straight month.

“Public investment is moving on a firm note,” the report said, compared with the July report’s assessment that it was increasing resilience.

The government kept intact its view that capital expenditure, exports and output were “picking up,” as well as its assessment that consumption was “picking up moderately.”

Japan’s economy expanded at the fastest pace in more than two years in the second quarter — growing at a 4 percent annualized rate — as consumer and company spending picked up, highlighting a long-awaited bounce in domestic demand.

Analysts expect the economy to continue growing at a healthy clip in coming quarters, offering the Bank of Japan hope that a tight labor market will finally start to boost wages and consumer spending.

Some ruling party lawmakers have called for compiling another supplementary budget to ramp up fiscal spending. But the government has shrugged off the chance of compiling one for now, arguing that a strengthening recovery makes it difficult to justify additional spending.

“The economy is enjoying a domestic demand-driven recovery,” Motegi told a news conference on Friday.

“Under current economic circumstances, I don’t expect the government to submit a supplementary budget at this autumn’s extraordinary parliament session,” he said.