For the first time in over a year, the Japanese government has upgraded its economic assessment, citing improved consumption as a positive indicator and raising hopes for a more widespread economic recovery. "The Japanese economy is recovering at a moderate pace, although it appears to be still pausing in parts", the Cabinet Office said in its monthly economic report for August, raising the assessment for the first time since May 2023.
The government noted that consumption is on the rise as the effects of shipping disruptions at certain automakers are diminishing. Additionally, increased household disposable income and temporary reductions in income and resident taxes have contributed to this boost in consumption.
The report indicated that the intense summer heat led to mixed results in consumption. Demand for air conditioners, parasols, and ice cream rose, but customer traffic at theme parks and restaurants decreased. Additionally, the report forecasted a drop in import prices, mainly due to the recent correction in the yen's weakening trend.
The government also upgraded its assessment on housing construction to "almost flat" from "in a weak tone" for the first time in more than two years, attributing the change to a halt in the decline of owner-occupied house construction. Assessments for the remaining sub-sectors, including exports, remained unchanged. The report was presented at a meeting attended by relevant cabinet ministers and Bank of Japan (BOJ) Governor Kazuo Ueda.
Earlier this month, government data revealed that Japan's economy grew at a much higher-than-anticipated annualized rate of 3.1 percent in the second quarter. This rebound, following a downturn at the beginning of the year, was largely driven by a significant rise in consumption.