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Japan cuts economic view on weaker production, spending due to COVID revival By Reuters


© Reuters. FILE PHOTO. A man cycles in front of a Kawasaki factory located at the Keihin Industrial Zone, Japan. February 17, 2016. REUTERS/Toru Hanai/File Photo

By Kantaro Komiya

TOKYO (Reuters) – Japan cut its economic view for the first time in four months as a surge in COVID-19 cases disrupted manufacturers’ global supply chains and dampened consumer confidence.

On Thursday’s monthly assessment, the government cited domestic and foreign virus issues as possible downsides for the country’s economic recovery.

In its September report, the government stated that “The economy continues to pick up amid severe circumstances due to coronavirus,” but it has been slowing recently.

Authorities lowered their views on production and private consumption, two of the most important economic factors. This was the first in 17 months.

A government official said that auto production has been declining lately, and parts shortages caused by COVID-19 epidemics in Southeast Asia had had a material impact on carmakers. This was before the cabinet approved this report.

The government report, which included a discussion about chip shortages in China and slowing recovery rates in other major economies like China, raised concerns that production cuts could spread to other industries.

The report stated that domestically, falling new car sales and declining household electronics shows consumers turning cautious, and are keeping their wallets tight for both goods and services.

Given the growing interest in renting out apartments and houses in suburban areas, the government has revised its views on home construction.

Officials said that Japan’s slowdown in economic recovery is behind the downgrading of its overall economic outlook. However, it does not indicate a change in course. They stressed that household income and corporate income remain the foundations of the economy.

This report is just weeks ahead of the expiration of Yoshihide Sug’s term, which he had announced this month that he will not be running again for prime minister.

While economists are curtailing their forecasts for the third-quarter output to a modest growth, the next leader of the ruling party, and by extension Japan, will be tasked with getting the world’s third-largest economy on a faster track to recovery ahead of general elections that must be held by late November.

On Nov. 15, the government will publish a preliminary estimate of Japan’s third quarter gross domestic product.

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