Japanese economic report cites need to closely monitor impact of natural disasters

The Japanese government released a monthly report on Thursday, emphasizing the need to closely monitor the aftermath of recent natural disasters while maintaining its basic economic outlook. The Cabinet Office stated that the Japanese economy is recovering at a moderate pace, but cautioned that attention should be given to the potential economic repercussions stemming from the Middle East situation and natural disasters.

Two significant events contributed to this warning: a powerful 7.1 magnitude earthquake that struck Kumamoto Prefecture on July 28, and a heavy downpour in Chiba Prefecture on August 13. The earthquake affected numerous semiconductor and automobile-related factories in the region, although production has gradually resumed. The Cabinet Office stressed that the economic impact through supply chains should be closely watched.

In reference to the heavy rainfall in Chiba, the government agency highlighted the need to pay attention to the impact on agriculture, forestry, and fisheries. The August report maintained the government's assessment on personal spending, which is the main driver of domestic demand. The private consumption was noted to be picking up, though specific figures were not provided.

The government also kept its view on business investment steady, attributing the steady pace to demand related to artificial intelligence. However, the assessment on housing starts for owner-occupied homes and condominiums remained weak due to rising material and housing prices. Despite this, the government revised up its view on housing construction, describing it as generally flat due to strong demand for rental properties.

The assessment on corporate profits was also upgraded, with the government reporting that they are improving following solid earnings for the April-June quarter. This contrasted with the previous month's view that corporate profits were merely moving upwards. The government maintained its assessment on corporate goods prices as unchanged, noting that they were rising at a slower pace due to a slowing of price increases for petroleum-related products.