Japan downgraded its overall assessment of the economy in October for the second consecutive month, citing a slowdown in production, likely adding to concerns over whether the government will go ahead with a second sales tax increase next year.
The
report is the latest acknowledgment that the economy is continuing to
struggle after a higher sales tax rate introduced earlier this year
weakened the momentum of a recovery jump-started by Prime Minister
Shinzo Abe
’s pro-growth policies.
In its
monthly economic report released Tuesday, the government said the
overall economy was recovering moderately, though “weakness can be seen
recently.” In September the government noted only “some weakness.”
The
cause for the deterioration in the view was industrial output, which
the government said was “decreasing recently” in the wake of a chill in
demand after the national sales tax rose to 8% from 5% in April. The
government said in September that production was “weakening.”
Japan
is set to raise the sales tax again to 10% in October 2015, provided
economic conditions permit, yet some lawmakers and advisers to Mr. Abe
have said that the second increase should be postponed. They say the
government should avoid a replay of the first half of 2014, when
consumption and output surged before falling off sharply after the levy
rose on April 1.
The prime minister has
said he would pay close attention to growth figures for the July to
September quarter when making a final decision before the end of the
year on whether to proceed. The economy contracted at an annualized rate
of 7.1% in the April-June trimester, but is expected to show some
growth on quarter in the following three-month period.
Tuesday’s report marked the first time the government has downgraded it economic assessment for two straight months since 2012.
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