TOKYO: Japan’s government lowered its assessment of the economy in May after the coincident indicator index fell at the fastest pace in three months amid growing signs that domestic demand and exports are losing strength.
Japan’s economy is stagnating, the Cabinet Office said on Monday, which is a downgrade from its previous assessment that economic growth is improving.
Robust corporate sentiment and the strongest capital expenditure plans in a decade had raised expectations that the economy would quickly bounce back from an expected slowdown in the second quarter caused by a build up in inventories.
However, the decline in coincident indicator index could raise concerns that China’s economic slowdown and turmoil from Greece’s debt crisis could hurt exports further.
The government’s more dour assessment also backs analysts’ views that growth may not be fast enough to stoke inflation towards 2 percent by the first half of fiscal 2016 – a goal set by the Bank of Japan as it looks to shake off years of falling prices.
The index of coincident economic indicators fell a preliminary 1.8 points in May from the previous month, the Cabinet Office said.
The decline was due mainly to a fall in shipments of durable goods such as cars and lower sales at wholesale traders, the data showed.
Auto makers and wholesalers said their business had weakened recently due to lower overseas and domestic demand, a Cabinet Office official said.
