(Bloomberg) -- The Japanese government upgraded its monthly economic assessment for the first time in 15 months, citing signs of a recovery in consumption.
The Cabinet Office said in its August report Thursday that the economy is recovering at a moderate pace, and only parts of it are pausing. In July it saw the pause as being more widespread.
The government raised its view on consumer spending for the first time in over a year, noting resilience in spending on goods. It also revised up its assessment for housing construction for the first time in over two years.
The government’s new view follows earlier data showing Japan’s economy rebounded to growth in the second quarter on the back of recovering domestic demand. Private consumption picked up for the first time in five quarters in the three months through June, partly supported by recent solid wage growth and Prime Minister Fumio Kishida’s tax rebates.
The improved economic picture portrayed in Thursday’s report offers some support for the Bank of Japan’s July decision to raise interest rates and cut bond purchases in a tightening step. Governor Kazuo Ueda said at a parliamentary hearing last week that the bank decided on the rate hike as the economy was moving in line with forecasts, calling the adjustment appropriate.
Deputy Governor Ryozo Himino said Wednesday that the BOJ will raise interest rates as long as inflation aligns with the bank’s view, echoing Ueda and reinforcing the message that further tightening remains on the table.
The uptick in economic conditions offers a tailwind for the ruling Liberal Democratic Party, which is set to have a leadership contest next month. A snap general election may follow soon after a new prime minister of Japan is chosen. So far more than 10 names have been floated as potential candidates.
©2024 Bloomberg L.P.
