The Japanese government said it was more optimistic about the world's second-largest economy for the first time in five months as stock prices rise and accelerating US growth lifts demand for exports.
The "environment surrounding the economy, such as the developments of stock prices and the US economy, is showing signs of change," the Cabinet Office said in a monthly report that assesses the state of Japan's economy. It raised its evaluation this month for the first time since March.
Japanese companies hired almost half a million extra workers in June, cutting the jobless rate to 5.3 percent. The government says that may boost consumer spending, which makes up more than half of the economy.
"If the stock market continues to stabilize at this rate, there will be promising effects on the real economy," said Jun Saito, a Cabinet Office economist who briefed
reporters on the assessment.
"The gain in jobs is a good thing for households, but we'll have to pay close attention to whether this will continue," he said.
Household spending had its biggest gain in almost two decades in June as the jobless rate dropped from 5.4 percent, the first decline in four months.
Japan's consumer confidence had its biggest gain in more than a year in the second quarter, rebounding from almost a five-year low, a government report showed last month.
Large manufacturers are also the least pessimistic in more than two years and plan to increase investment by 11.5 percent in the year to March 31, the Bank of Japan's quarterly Tankan business confidence survey showed last month.
"Corporate profits are showing moderate improvement and business investment is recovering," yesterday's report said.
The Cabinet Office also raised its assessment of housing investment after housing starts had the biggest gain in more than three years in June. It also raised its assessment of industrial production to "flat" from "weak."
However, it didn't change its view that the "economy remains roughly flat," saying exports are "weak." Exports fell a seasonally adjusted 1.7 percent in June from May on a volume basis.
"The outlook of the economy has begun to turn positive, but thanks mostly to the risks disappearing," such as the war in Iraq, said Hisashi Yamada, an economist at Japan Research Institute Ltd.
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