TOKYO — The Japanese government remained upbeat about the economy in its latest monthly report Monday, upgrading its view of industrial production, citing a steady manufacturing expansion and a sunny outlook for output.
The Cabinet Office's economic report for December kept the same language as in its previous reports for the fifth straight month, affirming that the economy was "recovering at a moderate pace."
The government last upgraded its overall assessment of the world's second largest economy in August. At that time, it declared Japan's economy had emerged from a lull.
Economists watch for even subtle changes in language in these monthly reports for shifts in the official outlook on the economy.
The government earlier this month revised downward its economic growth for the third quarter to an annual growth pace of 1 percent from a preliminary reading of 1.7 percent, citing private inventories. Despite disappointing data, at least the figures showed that the country's economy has grown for four straight quarters.
In Monday's report, the government said the economic recovery supported by domestic private demand is expected to continue, as resilience in the corporate sector is extending into the household sector.
While most of the factors making up the monthly assessment were unchanged, the government raised its assessment of industrial production, the first upgrade since March, citing output improvement expanding across the board, including transportation and machinery.
The latest report also reiterated that Japan overall "remains in mild deflation" — falling prices, which are largely to blame for dragging down on the economic recovery over the past 15 years.
Separately, the government said Japan's real economic growth in GDP terms is expected to slow to 1.9 percent for next fiscal year after an expected 2.7 percent growth the current fiscal year, citing growth in private consumption and capital spending to be moderate from this year's exceptional strength.
Capital expenditure growth will likely slow to 5 percent from this fiscal year's expected 7.7 percent, while private consumption is forecast to rise 1.6 percent, against projected growth of 1.9 percent for this fiscal year, according to the government estimate.
Domestic demand will add 1.5 percentage points to overall GDP growth next fiscal year, while external demand will contribute 0.4 percentage point, the forecast said.
Japan, Asia's biggest economy and the world's second largest, is finally rebounding after years of spiraling price declines. The government has set its long-term goal of ending deflation and achieving nominal GDP growth around 2 percent next fiscal year.