In a recent announcement, Japan’s Cabinet Office downgraded its view on the economy for November. This marks the first time in 10 months that such a change has been made, citing weak demand as a factor that has weighed on capital spending and consumer expenditure.
The statement from the Cabinet Office mentioned that “the economy is recovering moderately, although some areas showed stalemate recently.” It also noted that “business conditions and firms’ earnings continue to improve, the strength of the corporate sector is not necessarily translating into wages and investment.” Domestic demand such as corporate investment and consumer spending lack strength, according to the statement.
The statement also highlighted the need for close attention to rising prices, the Middle East situation, and financial market fluctuations. Bank of Japan Governor Ueda commented on this by stating “we will closely monitor these developments and take necessary measures to ensure stability in the financial system.”
The downgrade in economic view marks a pause in the pace of recovery in capital expenditure, which was cut for the first time since December 2021. Despite this setback, however, there remains hope for moderate recovery as long as risks from global monetary tightening and the Chinese economy are kept at bay.