Agence France Presse

Tokyo, March 15:

The Koizumi government today maintained its view the world’s second-largest economy is

continuing to recover steadily, led by solid exports and corporate spending, while indicating personal consumption is finally starting to pick up.

“The economy continues recovering steadily, supported by business investment and exports,” the Cabinet Office said in a monthly report for March. In the February report, the government had said the economy “is recovering steadily, supported by business investment and exports.”

Last week the Cabinet Office revised down Japan’s economic growth as measured by the gross domestic product (GDP) to 1.6 per cent for the December quarter from a previous estimate of 1.7 per cent, although that was still the highest growth rate in more than 13 years.

In the final quarter of 2003, private sector capital spending contributed one percentage point of growth to GDP and net exports — exports minus imports — added 0.4 percentage point to overall growth.

While maintaining the overall economic assessment, the Cabinet Office upgraded its assessment on the pace of exports, consumer spending and housing investment in the March report.

“Exports are rising rapidly and industrial production is also increasing,” the report stated, slightly more upbeat than the statement that “both exports and industrial production are increasing” in the February report.

The Ministry of Finance has said Japan’s current account surplus in January soared by 135.2 per cent from a year earlier to $9.51 billion, reflecting surging exports, heavy foreign investor buying of Japanese stocks and bonds, and increasing numbers of foreign tourists in Japan.

“Judging from the brisk trend of economic activity in Asia, exports are unlikely to have any negative impact on industrial production in Japan,” a Cabinet Office economist told reporters.

The Cabinet Office also pointed to emerging signs of improvement in what has been the missing link in the domestic economy’s recovery: rising consumer spending.

“Private consumption is now picking up,” the March report stated, upgrading its view a month ago that “private consumption is showing signs of a pickup.” “Reflecting the improvement of consumer sentiment and the receding downward pressure on labour conditions, consumers also seem to have turned willing to spend on housing,” further stated the report.