Japan Downgrades View Of Economy On Sluggish Consumer Spending

• Japan's government downgraded its view on the economy in February, the first downgrade since November 2023. The downgrade is attributed to sluggish consumer spending, slow wage recovery, and lackluster industrial output.
• The government also slashed its assessment of consumer spending for the first time in two years, stating that the pickup seems to be "stalling." Japan's economy unexpectedly slipped into recession in the fourth quarter of 2023, losing its position as the world's third-largest economy to Germany.
• The nation's real wages fell for 21 straight months in December, impacting household spending due to inflation outpacing wage recovery. The government cut its view on industrial output for the first time since March 2023, citing a production stoppage at Toyota Motor's small-car unit Daihatsu over safety issues.
• Recovery in capital spending is also "stalling" due to firms' solid capital spending plans not being realized, partly because of a labour shortage.
• The government highlighted the need to pay "full attention" to the impact of an earthquake in Japan's Noto peninsula on New Year's Day, which killed about 240 people. Analysts believe the earthquake will have only a small short-term impact on the economy.

(Source: Reuters)