Still bumps in road to better economy

Signs of a budding recovery in exports and production prompted the government on Monday to raise its assessment of the state of the economy, but concerns linger over deteriorating job conditions and the impact of the recent swine flu outbreak on business.

"I intuitively feel Japan's economy was at bottom during the January-March period, and some bright signs have since begun to appear," Kaoru Yosano, minister of economic and fiscal policy, told a news conference.

But he cautioned against undue optimism "because there still are downside risks."

Despite also forecasting improvements after March, private think tanks have maintained a mostly grim outlook. In particular, they stress that the economy's resilience is far from robust due to sagging private-sector demand.

The government's monthly economic report for May, issued Monday, said that "while the economy is in a difficult situation, the tempo of worsening has become moderate."

It was the first improvement in its economic assessment in three years and three months.

According to Cabinet Office statistics, exports in March increased from February for the first growth in seven months, led by sales to China.

Industrial production in March also experienced the first month-on-month increase in half a year.

Bolstered by the government's pump-priming measures, the value of public works contracts in March and April rose 15 percent and 20 percent year on year, respectively.

The number of bankruptcies nationwide fell in April from March as fewer builders went under.

But the jobless rate in March rose 0.4 percentage point--the steepest monthly increase in 42 years--to 4.8 percent. The gloomy figures show the effects of expanding production have yet to be felt in the job market.

Trade in some sectors, in particular the tourism industry, has been hit by the swine flu scare.

Personal consumption showed some improvement in April, led by new car sales that marked the first monthly increase in half a year. The pace of decline in department store sales slowed in April.

Meanwhile, private research institutes say while the government economic package will curb a drop in the nation's gross domestic product to some extent in fiscal 2009, the growth in fiscal 2010 will be small at best due to economic uncertainties in the United States and Europe.

Twelve think tanks forecast real GDP in fiscal 2009 will fall between 3.2 and 4.6 percent from the previous year, worse than the government estimate of a 3.3 percent decline. Eleven forecast growth of between 0.3 and 1.6 percent for fiscal 2010, and one expected a 0.1 percent drop.(IHT/Asahi: May 27,2009)