Gov't warns of slower Japanese exports amid eurozone crisis

TOKYO (Kyodo) -- The government on Tuesday maintained its basic assessment of the Japanese economy that it is making a moderate recovery but warned of slowing exports amid the sovereign debt crisis in Europe.

The economy "is still picking up slowly, while difficulties continue to prevail due to" the March 2011 earthquake and tsunami, the Cabinet Office said in a monthly report endorsed by relevant ministers, maintaining the view for the third straight month.

But it also said, "Exports are weakening recently," downgrading the component for the first time in three months.

The debt crisis and following economic downturn in the eurozone have weakened demand for Japanese products not only in the 17-nation single currency bloc but also in some developing economies in Asia that normally import Japanese parts to make final products to be exported to Europe.

The negative outlook for Europe has added to the weight on Japanese exporters, already suffering from the mass flooding in Thailand, where industrial output has sharply declined, putting downward pressures on Japanese manufacturers with facilities in the Southeast Asian country.

Among major sufferers were some high-tech firms, which provide semiconductors and other electronic parts to such emerging economies in Asia as China, Singapore and South Korea, the office said.

The monthly report also lowered the assessment of imports for the first time in six months, saying their "pace of increase is slowing."

The Cabinet Office said Japan has imported less material for production of goods to be exported, although natural resource imports such as crude oil and liquefied natural gas have increased because utilities must boost thermal power generation at a time when they are struggling to ensure safety for restarting idled atomic power reactors following the March 11 disasters that crippled a nuclear power plant.

The government kept on hold the assessments of other 12 components.

Production is "picking up slowly," private consumption "is almost leveling off," and recent price moves indicate Japan's economy "is in a mild deflationary phase," the report said. Employment conditions remain "severe," while companies' profits "have decreased" and their business spending "is leveling off."

As for the world economy, the report said it continues to make a "weak recovery."

The office upgraded the U.S. economy, citing the recent positive data on employment and consumption which it said added to the view that the world's biggest economy is "moderately recovering."

As for Europe, it downwardly revised the assessment, warning that the eurozone's sovereign debt crisis has led economies in the region to level off with some of them showing "weak development."

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