Japan government raises economy view, deflation easing

TOKYO (Reuters) - Japan's government raised its view on the economy for a third straight month in July and said deflation was abating as a result of the nation's expansionary policy mix of monetary easing and generous spending.

The upgrade reflects the impact of policies adopted by Prime Minister Shinzo Abe, who vowed on Monday to stay focused on reviving the stagnant economy after his coalition scored a strong victory in Sunday's upper house election.

The government also upgraded its assessment on capital spending, factory output and business sentiment as confidence is recovering and a softer yen helped to boost corporate earnings.

"The economy is steadily picking up and it shows some movement towards a self-sustainable recovery," the Cabinet Office said in its monthly economic report on Tuesday.

Last month's report had already acknowledged that the economy was picking up.

"Recent price developments indicate that deflation is easing," the report said, an encouraging sign for Abe, who has been striving to overcome 15 years of deflation.

The assessment is in line with that of the Bank of Japan, which has said the world's third-largest economy is finally recovering, boosted by the effects of a weakening yen and its massive monetary stimulus.

"We need further recovery in firms' capital spending and the income situation" before the recent bright signs in the economy can be termed a clear recovery, a Cabinet Office official said.

The government raised its view on capital spending for the first time in four months, saying it was "leveling off and shows some movement towards picking up".

Industrial production was "increasing at a moderate pace" with the government upgrading its assessment for a third straight month.

Business sentiment was improving, it said, marking the first upgrade in five months.

The government repeated that the economy will continue to recover as improved corporate profits will feed into household income and business investment and exports would also recover.

(Reporting by Kaori Kaneko; Editing by Ron Popeski)

Source: http://news.yahoo.com/japan-government-raises-economy-view-deflation-easing-021027629.html

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