TOKYO (Reuters) - Japan's government raised its view on capital spending for the first time in four months in May on the back of firms' positive earnings, showing the economy remains resilient despite some negative impact from a sales tax hike last month.
The government's improved outlook is in line with the Bank of Japan, which on Wednesday also revised up its assessment on capital expenditure and offered a slightly brighter view on the economy.
The government kept its assessment on the overall economy that it is recovering moderately, although it shows some weakness due to a sales tax hike that took effect in April.
A pullback in demand after the tax hike led the government to cut its view on factory output, business conditions and imports.
"The sales tax is having a downward impact on private spending and factory output. And business conditions show cautiousness recently. But such weakness is within our expectations and temporary," said a senior official at the Cabinet Office.
"Capital spending is increasing, employment is improving and public spending is underpinning the economy. The economy shows a solid footing."
The latest data showed Japanese businesses raised orders for machinery by the most ever in March and expect to book more orders this quarter.
With help from an extra budget compiled in the fiscal year that ended in March, the government upgraded its assessment on public spending for the first time in 11 months, describing it as firm.
The government said factory output showed a weak tone in the May report, downgrading its view for a second straight month after it previously said production was almost flat.
It also cut the assessment on business conditions for the first time since December 2012, although it predicted improvement ahead.
Japan's economy clocked its fastest pace of growth in more than two years in the first quarter as consumer spending jumped and business investment turned surprisingly strong before the sales tax rise.
Many analysts expect the economy will show a contraction for the April-June quarter following the sales tax hike, but they saw the world's third-largest economy returning to growth in the following quarters.
The government reiterated its expectation that the BOJ would achieve its 2 percent price stability target at the earliest possible time.
BOJ Governor Haruhiko Kuroda this week voiced his confidence that Japan is on track to meet the price target, while saying the central bank remained ready to adjust policy if needed.
yahoo.com
The government's improved outlook is in line with the Bank of Japan, which on Wednesday also revised up its assessment on capital expenditure and offered a slightly brighter view on the economy.
The government kept its assessment on the overall economy that it is recovering moderately, although it shows some weakness due to a sales tax hike that took effect in April.
A pullback in demand after the tax hike led the government to cut its view on factory output, business conditions and imports.
"The sales tax is having a downward impact on private spending and factory output. And business conditions show cautiousness recently. But such weakness is within our expectations and temporary," said a senior official at the Cabinet Office.
"Capital spending is increasing, employment is improving and public spending is underpinning the economy. The economy shows a solid footing."
The latest data showed Japanese businesses raised orders for machinery by the most ever in March and expect to book more orders this quarter.
With help from an extra budget compiled in the fiscal year that ended in March, the government upgraded its assessment on public spending for the first time in 11 months, describing it as firm.
The government said factory output showed a weak tone in the May report, downgrading its view for a second straight month after it previously said production was almost flat.
It also cut the assessment on business conditions for the first time since December 2012, although it predicted improvement ahead.
Japan's economy clocked its fastest pace of growth in more than two years in the first quarter as consumer spending jumped and business investment turned surprisingly strong before the sales tax rise.
Many analysts expect the economy will show a contraction for the April-June quarter following the sales tax hike, but they saw the world's third-largest economy returning to growth in the following quarters.
The government reiterated its expectation that the BOJ would achieve its 2 percent price stability target at the earliest possible time.
BOJ Governor Haruhiko Kuroda this week voiced his confidence that Japan is on track to meet the price target, while saying the central bank remained ready to adjust policy if needed.
yahoo.com
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