Japan says economy's condition stable, but weak

Fri Dec 21, 2012 5:22am EST
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By Antoni Slodkowski and Stanley White

TOKYO (Reuters) - Japan's economy condition stopped worsening, the outgoing government said on Friday in a monthly report, but it remains weak enough to justify a nudge from monetary and fiscal stimulus planned by the newly elected administration.

In the last monthly assessment produced before Shinzo Abe's cabinet takes over on December 26, the government kept its assessment of the economy's condition unchanged, snapping a four-month run of downgrades that was the longest such sequence since the 2008-09 financial crisis.

It said, the Japanese economy showed "weakness recently due to deceleration of the world economy", using the same phrase as in November.

"There are some bright spots here and there, but overall, the economy remains weak and we can't be optimistic," a Cabinet Office official in charge of compiling the monthly report told reporters.

"Companies, especially manufacturers, continue to operate in a tough environment and their profits are sluggish, with a drop in exports weighing on production and business sentiment."

The report, followed the Bank of Japan's third shot of monetary stimulus in four months and its fifth this year, mainly in response to growing pressure from incoming Prime Minister Shinzo Abe for bolder action to beat deflation.

But a further 10 trillion yen ($118.50 billion) addition to the BOJ's asset buying and lending pot also reflected the central bank's concern about sagging business confidence apparent in its latest Tankan business survey, economists said.

There is, however, skepticism over how quickly Abe's promised mix of a public spending splurge and aggressive monetary stimulus can translate into a pick-up in growth.   Continued...

Shinzo Abe, Japan's incoming Prime Minister and the leader of Liberal Democratic Party (LDP), attends a meeting at the LDP headquarters in Tokyo December 21, 2012. REUTERS/Toru Hanai