April 16, 2018 / 9:40 AM / in 9 months

Japan keeps assessment economy is 'gradually recovering'

TOKYO (Reuters) - Japan left unchanged its assessment that the economy is gradually recovering, suggesting in an economic report growth will rebound from an expected slowdown in the first quarter.

FILE PHOTO: A Japan Yen note is seen in this illustration photo taken June 1, 2017. REUTERS/Thomas White/Illustration/File Photo

“Japan’s economy is gradually recovering,” the Cabinet Office said in its monthly economic report for April on Monday. That was unchanged from the previous month.

The government left unchanged its assessment that consumer spending is “recovering” as spending on home electronics shows signs of improving and as households spend more on dining out.

The government said capital expenditure is gradually expanding, unchanged from the previous month, after the Bank of Japan’s tankan survey showed earlier this month that mid-sized firms plan to increase investment.

The tankan survey also showed companies of all sizes said their production capacity is insufficient to meet demand, which should encourage future business investment, the Cabinet Office said.

Japan’s longest run of economic growth since the 1980s asset bubble was expected to stall in the first quarter but is seen likely to regain some momentum over the course of the year, a Reuters poll of economists showed.

The economy was forecast to grow at an annualised rate of 0.5 percent in the first quarter as consumer spending and factory output weakened, the poll of 39 economists taken April 4-12 found. That’s down from 1.6 percent annualised growth in the fourth quarter.

The world’s third-largest economy has grown for eight straight quarters through the end of 2017, the longest continuous expansion since the 1980s bubble economy.

Few economists expect weakness in the first quarter to be prolonged, which should encourage policymakers that moderate economic growth can be maintained

One risk to Japan’s outlook is the possibility of trade friction with the United States.

U.S. President Donald Trump has asked his trade advisers to look at rejoining the Trans-Pacific Partnership, a multinational trade pact that he withdrew the United States from last year.

Japan led other countries to conclude the trade pact without U.S. participation and has repeatedly said it would welcome the United States if it reconsidered.

However, that does not exclude the chance that the United States will become more vocal in its criticism of Japan’s trade surplus and push for ways to lower the surplus.

Japan’s gross domestic product data is due on May 16.

Reporting by Stanley White; Editing by Jacqueline Wong

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