Japan economy picking up, consumer spending firm

Thu Feb 16, 2012 3:40am EST
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By Kaori Kaneko

TOKYO (Reuters) - The government stuck to its assessment that Japan's economy is slowly picking up on Thursday and raised its view on consumer spending for the first time in six months, after a resumption of subsidies for fuel-efficient cars boosted sales.

It said consumer spending was holding firm, with incomes flat and a recovery in consumer confidence.

But it remained cautious over risks from a further slowdown in overseas economies stemming from Europe's debt problems and the impact on financial markets, as well as power supply constraints following the Fukushima radiation crisis triggered by the March earthquake and tsunami.

Fukushima raised public fears over nuclear safety that have prevented the restart of reactors shut for routine checks, and the loss of nuclear power has raised the prospect of forced power rationing and blackouts in the summer peak demand period.

The release of the monthly report comes two days after the Bank of Japan surprised markets by easing monetary policy, boosting its asset purchases and setting 1 percent consumer inflation as a near-term goal.

The government view is in line with that of the BOJ, whose governor Masaaki Shirakawa said after the central bank's meeting that the economy is headed towards a moderate recovery but the outlook remains highly uncertain.

"The economy is still picking up slowly, while difficulties continue to prevail due to the earthquake," the Cabinet Office said in the report.

The economy shrank more than expected in the October-December quarter as flooding in Thailand, a strong yen and weak demand hurt exports, after having rebounded in the third quarter from an earthquake-triggered recession.   Continued...

People wait for a bus to arrive in front of a shop window, where the lights have been turned off to conserve energy, at a department store in Tokyo May 19, 2011. REUTERS/Yuriko Nakao