Japan gets more blunt about sick economy

Associated Press

TOKYO — The government, warning that Japan's economy is deteriorating, has downgraded its economic assessment for the fifth straight month.

The Cabinet office's June economic report, released yesterday, said consumer spending is weak and business investment has peaked as falling exports hurt production and profits weaken.

"The economy is deteriorating," said the report. The language was stronger than last month's report, which only said the economy had "weakened further."

The report comes just three days after officials announced that the economy shrank 0.2 percent for the quarter ending in March.

In other words, gross domestic product grew only 0.9 percent in the entire fiscal year — lower than the government's target of 1.2 percent expansion.

Yesterday's report will give ammunition to government officials who have called on the central bank to do more to support the anemic economy and fight deflation.

Economy Minister Heizo Takenaka planned to attend the Bank of Japan's policy meeting to explain the government's resolve to push ahead with structural reforms.

After the release of the June economic report, Takenaka said he would seek to ensure that the central bank conducts monetary policy in line with the government's wishes.

"I hope the bank will implement monetary policy in harmony" with the government, Takenaka said yesterday.

Takenaka had said earlier in the day that he would urge the central bank's policy board to act flexibly to ensure an economic recovery and offset deflationary pressures that structural reforms may bring about.