TOKYO, May 26 - Japan's government left its May appraisal of the economy intact, saying growth remains on a moderate recovery path but warning that developments in the Middle East and swings in financial markets continue to cloud the outlook.
The report reiterated sector-by-sector assessments that were carried forward from earlier updates:
- Private consumption - The government maintained that consumption is "showing movements of picking up", while also cautioning that consumer sentiment has been weak in recent periods.
- Business investment - Capital spending was again described as "picking up".
- Exports - Officials kept the assessment of exports as "almost flat". The report noted exports to the Middle East have fallen significantly; these shipments are centred mainly on automobiles and represent about 4% of total exports.
- Imports - Imports were judged to be stable on the whole, though crude oil imports from the Middle East decreased significantly in April. The government said it is pursuing alternative sourcing for crude oil and expects such measures to supply about 80% of the required quantity by June.
- Industrial production - Output remained described as "flat", unchanged from the previous report.
- Corporate earnings - The government took a slightly more upbeat tone, saying profits "are showing movements of improvement" while urging close monitoring of the potential effects of developments in the Middle East.
- Prices - Consumer prices continue to be described as "rising moderately". Corporate goods prices were assessed as "rising recently", an upward move from April's description of "rising moderately".
On the outlook, the government reiterated its view that an improvement in employment and income conditions, together with the impact of various policy measures, should support a gradual recovery. Authorities said they will continue to monitor the situation in the Middle East as well as volatility in financial and capital markets.
This assessment preserves a cautiously positive baseline for Japan's near-term growth while explicitly identifying specific vulnerabilities tied to energy supplies and external demand. The government highlighted concrete supply adjustments for crude oil and drew attention to the relatively small share of Middle Eastern markets in Japan's overall exports, even as those markets have recorded sharp declines in shipments.