Japan cuts view of economy amid overseas slowdown

2011-10-17 17:02:30

The Japanese government on Monday downgraded its view of the economy for the first time in six months as an overseas slowdown weighed on output and exports, while a strong yen further clouded the outlook.

In its monthly report for October, the Cabinet Office said "the Japanese economy is still picking up although the pace has decelerated, while difficulties continue to prevail" due to the March 11 earthquake and tsunami.

The previous report in September gave no reference to a slowing recovery.

Tokyo lowered its assessment of exports, industrial production and personal consumption while warning that the effects of deflation still pose a threat.

The report stated that the pace of recovery in production is decelerating and that exports are levelling off.

The government also warned of the need to pay attention to the yen's persistent strength, as it erodes the value of exporters' repatriated earnings.

Analysts warn Japan's recovery from recession may continue to slow amid concerns about the health of the global economy and the impact of a strong yen on the nation's exporters.

Japanese companies have worked to quickly to restore production levels after supply constraints in the wake of the March 11 earthquake forced them to shutter plants.

But there are concerns that a strong currency could undermine them as an uncertain global outlook prompts more firms to scale back production.

There are also concerns that a strong yen could speed up a shift of production overseas as companies search for lower labour costs.

Japan has unveiled a plan to make $100 billion available to help companies make the most of the unit's strength and acquire assets overseas, while boosting its oversight of foreign exchange markets against speculative moves.