Japan retained its view of a modest recovery in the world's third-biggest economy, but upgraded its assessment of corporate earnings for the first time since March 2022 even as it warned of risks to growth from a global slowdown and volatile markets.
The economy is "recovering moderately", the government said in its monthly report for September on Tuesday, maintaining its view from the previous month as policymakers continue their efforts to shore up growth following the end of COVID curbs earlier this year.
The government also said that corporate profits were "improving as a whole", the first upgrade in its assessment in 1-1/2 years after a strong quarter earnings season.
The latest report comes after Japanese Prime Minister Fumio Kishida unveiled on Monday the pillars of a new economic package, which would include steps to ease the burden from price hikes and boost wages.
Authorities said that private consumption, which makes up more than half of the economy, was "picking up" in the report thanks to improving jobs and wage conditions. The government also maintained its view that capital spending was "picking up", underpinned by a business focus on investment in labour-saving equipment such as digitalization, the report said.
Policymakers, however, warned of the challenges to the broader economy from global monetary tightening, China's economic prospects as well as the impact from price increases and volatile financial market.
Revised data earlier this month showed Japan's economy grew less than initially estimated in the second quarter, raising doubts about the strength of the recovery that authorities are counting on in order to exit from ultra-easy monetary policy.
Bank of Japan Governor Kazuo Ueda said on Monday there was "very high uncertainty" over whether companies would continue raising prices and wages. He also offered a cautious take on the overseas economic outlook, including China's slowdown.
A central bank's survey due on Oct. 2 is expected to show Japan's business confidence improved slightly in the three months to September, according to a Reuters' poll.
(Reporting by Kaori Kaneko Editing by Shri Navaratnam)