Japan says economy in moderate recovery, cautious on risks

TOKYO (Reuters) – Japan’s government said on Wednesday the economy was in moderate recovery but it remains cautious due to potential global economic risks and financial market volatility.

In its monthly economic report, the government said corporate profits for April-June showed strong growth and wage recovery was also solid. However, transport disruptions due to typhoons affected travel demand.

“The Japanese economy is recovering moderately although it is still pausing in parts,” the Cabinet Office said in its report for September, maintaining the same assessment from August.

Private consumption, which accounts for more than half of the economy, showed signs of an uptick, the report said.

Consumer spending on services such as dining out also showed a gradual recovery, although the travel industry, including hotels, suffered due to typhoon disruptions, an official at the Cabinet Office said.

The government raised its bankruptcy outlook for the first time since March 2021 as the number of bankruptcy filings slowed.

The report also indicated a slowing pace in the rise of the corporate goods price index, following a slowdown in the country’s annual wholesale inflation in August.

Among other key economic areas, the government retained its assessment for capital spending and industrial production, expecting the economy will continue its moderate recovery, supported by improvements in employment and wages.

Japan’s economy grew at a slightly slower pace than initially reported in the second quarter, hurt by downward revisions in corporate and household spending that point to a bumpier second half for consumption.

The Bank of Japan is expected to keep monetary policy steady this week, but signal forthcoming rate hikes as it begins to normalise policy after years of aggressive stimulus.