Japan Keeps View Economy Is Recovering Despite Weak Output

The Japanese government stuck to its view that the economy was recovering despite weak industrial output, while noting weaker consumer confidence in its monthly economic report.

"The economy is recovering despite weakness in some sectors of industrial production," the government said in the report issued on Tuesday, using the same phrase for the fourth straight month.

While warning against the impact of oil price movements on economies both at home and overseas, the government maintained its outlook that domestic private-sector demand will support the economic recovery.

The report said the continued strength in the corporate sector will filter through to households, while it was cautious about weaker consumer sentiment.

The government said consumer sentiment was on a soft note, lowering its view from the previous month's report, which said it was flat.

This follows a recent government survey that showed Japanese consumer confidence worsened to a three-year low in June from three months earlier on rising prices of household goods.

The seasonally adjusted sentiment index for general households stood at 44.3 in June, the lowest since 44.0 in June 2004, official data showed last week.

However, the government did not change its overall assessment on personal consumption, which accounts for more than half of economic activity, saying it was picking up.

An official at the Cabinet Office, which draws up the monthly report, cited an improved view on income conditions as balancing the deterioration in consumer sentiment.

The view on income conditions was upgraded as the number of employed has been increasing, the official said.

The government lowered its view on the trade and services surplus to flat from the previous report, which said it was increasing, partly due to weak demand in the United States.

It also slightly upgraded its view on domestic wholesale prices, saying they were rising due to increased raw material costs. It had previously said the rise was only a recent trend.

Bank of Japan data showed last week that the corporate goods price index, which tracks trends in wholesale prices of goods, rose 2.3% in June from a year earlier. The pace of year-on-year rise sped up from 2.2% in May and matched that of April.