By Kaori Kaneko
TOKYO (Reuters) – Japan’s government upgraded its assessment of the economy on Wednesday for the first time since May 2019 after a key indicator improved for August, pointing to a gradual recovery from the impact of the coronavirus pandemic.
The index of coincident economic indicators, which measures a range of data including factory output, employment and retail sales numbers, rose a preliminary 1.1 points from the previous month to 79.4 in August, the Cabinet Office said on Wednesday.
Based on the index data, the Cabinet Office said that showed economic activity in the world’s third-largest economy had stopped contracting, an upgrade from its previous view that the economy was “worsening” in July.
“There is a possibility that the index will grow further this year as there is room for exports, notably auto shipments, and consumer spending to recover,” said Koya Miyamae, senior economist at SMBC Nikko Securities.
“The economy overall has been picking up after hitting the bottom around May and a gradual recovery is expected to continue.”
The data offers some relief for new Prime Minister Yoshihide Suga, who has pledged to contain the coronavirus outbreak and revive Japan’s battered economy.
The report follows the release last month of more upbeat economic outlook from the Bank of Japan, suggesting that no immediate expansion of stimulus was needed to combat the coronavirus pandemic.
Also on Wednesday, the Cabinet Office reported the index of leading economic indicators, which is a gauge of the economy a few months ahead and is compiled using data such as job offers and consumer sentiment, grew 2.1 points to 88.8 from July.
Still, analysts expect the pace of recovery may not be strong enough to recoup losses caused by the coronavirus outbreak, underscoring the challenge for policymakers to revive the economy.
Japan’s economy sank deeper into its worst post-war contraction in the second quarter, reeling from the impact of the coronavirus.
(Reporting by Kaori Kaneko; Editing by Chang-Ran Kim and Christian Schmollinger)