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Japan cuts capex view, says overall conditions remain severe in November report

By Daniel Leussink
·2 min read
Outbreak of the coronavirus disease (COVID-19) in Tokyo

By Daniel Leussink

TOKYO (Reuters) - Japan's government cut its view on capital spending in November for the fifth time this year as companies trimmed investment, and said overall economic conditions were still severe due to the coronavirus pandemic.

The world's third-largest economy rebounded sharply in the third quarter from the COVID-19 hit, largely thanks to stronger consumption and exports, but a resurgence in infections at home and abroad is weighing on the outlook.

"The Japanese economy remains in a severe situation due to the novel coronavirus, but it is showing signs of picking up," the government said in its November economic report.

The government said the impact from policy measures at home and improvement in activity overseas supported hopes for a continued rebound in the economy.

But it also warned "full attention" should be given to further risks from the coronavirus, in particular on domestic consumption, a government official said.

"Given the rise in new infections, if such increase will lead to consumers excessively curtailing various spending activities, that will become a downside risk for consumption," the official said.

Among key economic elements, the government said business expenditure has been decreasing, slashing its assessment of the component for the sixth time since last upgrading it in September 2018.

Japan has seen relatively low capital spending growth compared to other major countries over the past 15 years, which is a reflection of the expected growth rate of the domestic market, the official said.

Japan needs solid capital spending to offset risks to its export-reliant economy from abroad.

The government upgraded its view on output, saying it is picking up due largely to solid car and transport equipment production.

It left its assessment of the other remaining components in the report, such as exports and employment conditions, unchanged.

(Reporting by Daniel Leussink; Editing by Kim Coghill)