The Japanese government raised its assessment of the economy for the first time in eight months, as it sees stimulus spending and improved conditions for exporters driving a recovery from recession.
“The recovery is expected to resume while supported by the improvement of export conditions,” Japan’s Cabinet Office said in a monthly report released yesterday, after it downgraded its assessment in four of the last seven months.
The government announced ￥10.3 trillion (IS$117 billion) in stimulus earlier this month to boost growth and end deflation. Stocks fell and the yen rose for a third day after the Bank of Japan (BOJ) on Tuesday set a 2 percent inflation target with no deadline and delayed extra easing for a year.
“The economy is recovering because production has been strong,” said Hiroaki Muto, senior economist at Sumitomo Mitsui Asset Management in Tokyo. “We may see a slowdown from 2014 when the effects of Abe’s policies begin to wear off.”
Goldman Sachs raised its real GDP growth forecast for the year, which starts in April, to 2 percent from 1.2 percent, it said in an e-mailed note to clients.
“Public works in the stimulus package, yen depreciation that has factored in anticipated monetary policy changes and the attendant improvement in corporate and household sentiment” were reasons cited for the increase.
In another sign of the challenges facing Abe, corporate loans fell last month from three months earlier, a poll of senior loan officers released by the BOJ showed.
Japan’s economy may have contracted for a third quarter in the October-December period by 0.6 percent, according to the median estimate in a Bloomberg survey of economists. Goldman Sachs expects public works to power GDP growth to 3.2 percent in the three months from April.