Gov't, BOJ carefully wording their optimism about economy+

TOKYO, Aug. 11 Kyodo -
The government maintained its key assessment of the Japanese economy Tuesday
despite concerns over high unemployment rates, by citing the signs that output,
exports and consumption are picking up, while the Bank of Japan stressed that
the economy has ''stopped worsening.''

While warning that the level of economic activity in the country is still low
amid the global slowdown, the monthly report by the Cabinet Office said, ''The
economy has been showing movements of picking up recently.'' The government
kept its basic assessment unchanged after upgrading it for three months in a
row through July.
It also retained most of the wording used in last month's report to describe
each aspect of the economy.
Japanese exports and industrial output ''are picking up'' while private
consumption has been showing ''movements of picking up recently.''
On consumption, the report said the government's stimulus policies, including
subsidies for the purchase of energy-efficient appliances and
environmentally-friendly vehicles, have had a favorable impact.
The office struck a pessimistic note on business activities, however. Corporate
profits and capital spending have declined ''very substantially,'' it said.
Yoshimasa Hayashi, economic and fiscal policy minister, told reporters, ''The
environment surrounding households remains severe,'' adding that the government
will carefully watch for falls in individual incomes.
The report also underlined that employment conditions are ''worsening rapidly.''
Government data showed last month that Japan's seasonally adjusted unemployment
rate climbed 0.2 percentage point to 5.4 percent in June, hitting the highest
level in six years.
The worsening employment situation has increasingly added to government
concerns over the country's economic outlook.
The report underlined that the economy ''is likely to remain severe for the
time being'' although further recovery is expected thanks to progress in
inventory cuts by manufacturers, the effects of the government's stimulus
policies and recoveries in other major economies.
The Cabinet Office upgraded its valuation of the global economy as a whole, as
well as of the U.S., Asian and European economies.
It said signs of economic recovery have been spreading especially in Asia, and
that the world economy is on the way to bottoming out.
The pace of U.S. economic contraction has slowed, aided by improving
consumption, the report said, while the Chinese economy is recovering on rises
in domestic demand, leading other Asian economies struggling to emerge from the
downturn.
The rate of shrinkage has also been slower in the European economies but there
remains a risk that fallout from the financial turmoil may prolong the
recession, the report warned.
Finance Minister Kaoru Yosano said the outlook for Japan's economy seems
brighter ''in connection with (the possible recoveries in) the U.S. and other
overseas economies.''
The positive effect on the economy of the government's fiscal-boosting
measures, including more orders for public work projects, will show up from
September, the minister added.
Also Tuesday, the BOJ held its key short-term interest rate steady at 0.1
percent after its policy meeting.
In its statement, the central bank maintained its view on the Japanese economy,
saying it has ''stopped worsening,'' helped by a pickup in exports and output.
The bank even said the economy is likely to start recovering during the six
months through March, although there remains a ''significant level of
uncertainty'' concerning the outlook that stems from developments in overseas
economies and global financial markets.
On prices, the BOJ said the recent falls in Japan's key consumer price index
will accelerate further.
==Kyodo