Japan on Monday retained its view that the economy is recovering moderately for August and sounded more upbeat about exports, though it also warned of downside risks from China's economic slowdown due to real estate woes.
In its monthly economic report, the government upgraded its view on exports for the first time in three months, noting there were "signs of picking up." The revision reflects robust auto shipments following the easing of a chip shortage and the revival of inbound tourism.
Housing construction, however, was downgraded for the first time in 18 months to "almost flat" from "steady" a month earlier.
The August report comes after Japan's economy grew at an annualized real rate of 6.0 percent in April-June, marking the fastest pace of expansion since 2020.
Strong exports were a major driver of the previous quarter's economic growth, but domestic demand was unexpectedly weak, raising questions about the country's future growth prospects, economists said.
"The Japanese economy is recovering at a moderate pace," the Cabinet Office said, using the same expression for the fourth straight month.
On potential downside risks to Japan, the report referenced lingering concerns about the Chinese economy, which could add to the negative effects of monetary tightening on global growth. Some Chinese property giants are heavily in debt and investment in real estate development has fallen.
"Full attention should be given to price increases and fluctuations in the financial and capital markets," the report said.
There were no changes in the government's assessment of other components of the world's third-largest economy.
The report noted that both private consumption and capital investment are "picking up," and industrial production is showing "signs of picking up."
The overall assessment of the global economy was retained, with the report describing it as "picking up despite weakness in some regions." The office cut its view on China for the first time in seven months due to real estate sector concerns.