Japan's government on Friday maintained its assessment that the economic recovery from the coronavirus fallout is continuing, while warning of the impact of rising crude oil and other raw material costs accelerated by Russia's invasion of Ukraine.
Although some weaknesses remain due to the pandemic, "the Japanese economy continues to show movements of picking up," the Cabinet Office said in its overall assessment for March, retaining the evaluation that was downgraded in February.
Regarding the outlook, the office said "full attention should be given to the further increase in downside risks" including rising raw material prices and volatility in stock and currency markets amid the Ukraine crisis.
Gasoline, electricity and city gas costs have been rising following surging crude oil prices, while the depreciation of the yen has pushed up import costs for resource-poor Japan.
By component, the evaluations for both wholesale and consumer prices were retained, but the office changed their descriptions from February.
The report said wholesale prices have been "rising recently," eliminating "moderately" from the previous description, while consumer prices were described as "rising moderately recently," changed from "steadily."
The assessment said the prices of many food items including wheat are expected to climb from April, and the rise in consumer prices may outpace wage growth even after the country's spring wage negotiations between management and labor unions.
The evaluation of imports was upgraded for the first time in 13 months, with the office saying they were "almost flat" compared with "in a weak note" in the February report.
The assessment of corporate profits was upgraded for the first time in seven months to "improving as a whole," reflecting upbeat earnings for the October-December quarter. During the period, economic activities resumed after a COVID-19 state of emergency was fully lifted on Oct. 1.
But the evaluation of current business confidence was downgraded for the first time in 10 months to "a pause in movements for picking up" due to the rising raw material costs and uncertainty over the Ukraine crisis.
The assessments of other components including private consumption and business investment were maintained.
The latest report did not reflect the full lifting of a COVID-19 quasi-state of emergency on Tuesday, under which restaurants and bars were asked to close earlier in an effort to curb a resurgence of infections amid the spread of the highly contagious Omicron variant of the coronavirus.