TOKYO (Reuters) - Japan’s government left its assessment that the economy is recovering at a moderate pace unchanged in August, with weakness continuing to centre on exports, according to a monthly economic report released by the Cabinet Office on Friday.
Risks to the outlook caused by an overseas slowdown and the U.S.-China trade war could add to pressure on the government to boost spending to offset a potential drop in domestic demand after a sales tax hike in October.
On the bright side, the government raised its assessment of public works as sectors less affected by slowing global trade were seen pulling the economy forwards.
A government official added that domestic demand continued to contribute positively since the fourth quarter of last year.
Demand for durable goods remained solid thanks to a sharp rise for television sets, while sales of air-conditioners fell as the rainy season lasted longer than usual, the official said.
Japanese Economy Minister Toshimitsu Motegi told reporters at a news conference he didn’t see any sign of pent-up spending among consumers ahead of the nationwide sales tax hike to 10% in October.
Data earlier in the day showed July retail sales fell more than expected.
The previous tax rise to 8% from 5% in April 2014 hurt consumer confidence and triggered an economic slump.
The August report left unchanged the government’s assessment that exports were soft, with those to Southeast Asia declining especially rapidly, he said.
Industrial output rebounded more than expected in July, other data released on Friday showed, but production was set to contract next month, signalling a darkening outlook for the economy.
The government also stuck to its view that capital expenditure was expanding at a moderate pace despite weakness in machinery investment.
Japan’s economy, the world’s third-largest, has managed to grow this year despite the global slowdown. It expanded an annualised 1.8% in the second-quarter, largely thanks to robust household spending and capital expenditure.
Despite the positive run, the government revised down its view for the economy twice this year, in March and May.
Reporting by Daniel Leussink; Editing by Kim Coghill