Japan keeps economic view unchanged but sounds alert over Ukraine war

The government kept its basic assessment of the country’s economy unchanged in a monthly report released Friday, while sounding an alert over the impact of the Ukraine war.

The country’s economy “continues to show movements of picking up, although some weaknesses are seen” as the COVID-19 situation remains severe, the Cabinet Office said in the March report.

The wording remained unchanged from the previous month’s report in which the government lowered its basic economic view for the first time in five months, citing weakness in private consumption.

In the March report, the government kept intact its view on private consumption, saying that its rebound “appears to be pausing.”

“Consumption of services remained weak partly due to the Japanese government’s COVID-19 pre-emergency measures, which were fully lifted on Monday,” a Cabinet Office official said, adding that private consumption “did not deteriorate further.”

Looking ahead, the March report said that the economy is “expected to show movements of picking up.”

At the same time, however, it warned that “full attention” should be paid to downside risks arising from the Ukraine-Russia conflict.

“The impact of Russia’s aggression in Ukraine, for example, on international commodity prices, financial markets and trade would affect the Japanese economy,” the Cabinet Office official said.

The government upgraded its view on imports for the first time in 13 months, saying that they are almost flat. In the February report, it said that imports were in a weak tone.

The upgrade came as a recovery in production activities in China, which had been slow partly due to curbs on electricity use, pushed up Japan’s imports from Asia, the Cabinet Office official said.

The government raised its view on corporate profits for the first time in seven months, as many companies reported robust earnings for October-December, during which the country’s COVID-19 situation was calmer, according to the official.

The March report said a pickup in business sentiment appears to be pausing amid uncertainties over the course of the Ukraine crisis and fallout from it, revising down the assessment of the sector for the first time in 10 months.

While keeping its assessment unchanged, the government altered its wording on consumer prices, saying that they are “rising moderately recently.” The February report said that such prices “show steady movements.”

The alternation reflects rising gasoline, electricity and gas prices due to higher crude oil prices. Higher raw material prices, traced to the Ukraine crisis, are “set to push up prices for a wide range of products in and after April,” the official warned.

The government left unchanged its views on business investment, exports and employment.