TOKYO, Feb 19 (Reuters) – Japan’s government cut its view on the overall economy in February for the first time since April last year as an extended state of emergency to curb coronavirus infections battered consumer spending.
Analysts expect the world’s third-largest economy to shrink in the current quarter as renewed restrictions rolled out in Tokyo and some prefectures last month to contain the pandemic damage businesses and household spending.
“The economy shows some weakness though it continued picking up amid severe conditions due to the coronavirus,” said the economic report for February.
The government slashed its assessment on consumer spending for a third straight month in February, saying it has shown weakness recently, as the emergency hurt the retail industry as people avoided eating out and travelling.
Meanwhile, the government raised its view on capital spending for a second consecutive month, saying it has been “recovering recently”, reflecting an improvement in the nation’s core machinery orders.
The government also upgraded its assessment on corporate profits for the first time in two months as they were “picking up while weakness is seen in non-manufacturers” due to the impact from the pandemic.
Manufacturers’ profits improved helped by a recovery in auto production and 5G technology related demand, the report said.
Thanks to brisk demand for communication devices, the government raised its outlook on imports for the first time in two months.
Japanese stocks rose to a 30-year high this week as progress in the distribution of coronavirus vaccines boosted expectations for an economic recovery.
Japan’s economy grew for a second straight quarter in October-December, extending the recovery from its worst postwar recession earlier last year.
But new state of emergency measures cloud the outlook, underscoring the challenge policymakers face in preventing the spread of COVID-19 without choking off the country’s fragile recovery.
The government estimates the economy will expand 4.0% in the next fiscal year starting in April after an expected 5.2% fall in the current fiscal year to March.
(Reporting by Kaori Kaneko; Editing by Jacqueline Wong)