Japan on Wednesday retained its assessment on the economy as "recovering at a moderate pace," using the same expression for the third straight month, as domestic demand remains solid following the removal of anti-COVID curbs.
In its monthly report for July, the Cabinet Office said Japanese firms see improving business conditions, the first upward revision in the category in seven months.
The change came after manufacturers were heartened by the easing of supply bottlenecks that had hurt production, while service providers continue to benefit from pent-up demand from the COVID-affected period.
The office also noted public investment is firmer, in the first upward revision in 11 months. Its views on other key components of the economy, from private consumption and capital investment to production and exports, were retained.
Japan's economy marked its third straight quarter of growth in the three months to June despite accelerating inflation, economists say. But they remain cautious about economic slowdowns in the United States and China, both major trading partners for Japan.
"The Japanese economy is recovering at a moderate pace," the July economic report said, adding that slowing economic growth overseas caused by global monetary tightening poses a downside risk.
"Full attention should be given to price increases and fluctuations in the financial and capital markets," it said.
The widening interest rate gap between Japan and both the United States and Europe supports the view that the yen's weakness will persist, analysts say, as ultralow rates will likely continue while the U.S. and the eurozone's central banks are raising borrowing costs to rein in inflation.
Both private consumption and business investment are "picking up," while industrial production has shown "signs of picking up." Exports, meanwhile, are "steady."
Japan's slow but steady economic recovery from the pandemic has been supported by consumers spending more on services, dining out and taking trips, partly because of household savings accumulated during the pandemic. Companies have also been ramping up investment.
The revival of inbound tourism has provided a boost to the economy as the yen's weakness against the U.S. dollar since last year has made Japan a cheaper destination.
The Cabinet Office maintained its assessment on the global economy, saying that it is "picking up despite weakness in some regions."
