Data Show Japan’s Recovery Is on Track but Not Accelerating

A series of economic indicators released this week confirm that Japan’s economic recovery is still on track but that the results are not strong enough to support hopeful views that the rebound’s pace has been speeding up.

“For those expecting the pace of economic recovery to accelerate with time, the current pace of recovery may seem a little weak,” an official of the Ministry of International Trade and Industry told a news briefing announcing data for industrial output, a key barometer of economic health.

“We share the view of the Bank of Japan that the economic recovery may not necessarily be without setbacks,” the official said.

Industrial output for July rose 4.1% from the previous month on a seasonally adjusted basis. Economists had predicted on average a rise of 3.4%.

But the ministry forecast a minimal quarter-on-quarter growth of 1.1% for the July-September period.

“The output data show that the economy lacks strength, but it is still continuing slow recovery,” said Yozo Nishimura, an economist at Bank of Tokyo-Mitsubishi Ltd. “The data confirmed that there are no downward risks in the economy. A bright side is that inventories are moving toward an appropriate level.”

The closely watched figure was the focus of even more attention than usual after other important data released earlier this week showed business sentiment taking a surprise downturn.

According to the Bank of Japan’s tankan survey of corporate sentiment for August, released Wednesday, the business outlook among major manufacturers became more pessimistic since the previous survey, in May.

That report prompted the central bank to assure jittery financial markets that the economy was maintaining a gradual comeback, though the path may not be a smooth one.

Other economic data released Friday also helped to ease fears that the recovery may be faltering. Japan’s jobless rate fell to 3.4% in July from a record high of 3.5% over the previous two months.

Housing starts for July advanced 21.7% from a year earlier, helped by record low interest rates and falling real estate prices.

Construction orders in July also rose 1.7% from a year earlier, supported by economic stimulus measures such as hefty spending on public works projects, which have helped to put the nation’s economic recovery on track.

Consumer price data indicate no fear of inflation. Nationwide, prices continued to be stable in July, with key Tokyo-area prices for August rising a minuscule 0.1% year-on-year.