TOKYO, March 22 (Reuters) - Japan's government cut its assessment of the
strength of industrial production for the first time in three months in March,
pointing to weakening demand in the global semiconductor industry.
Its overall assessment of the economy was unchanged in the monthly economic
report, however.
Amid lingering concerns about stress in the world's banking system, the
government retained a vigilant stance in relation to economic effects of
financial market fluctuations.
Issued by the Cabinet Office, the report said industrial production had
weakened recently because the global semiconductor industry had faced a
deteriorating market and was therefore buying less fabrication equipment. Japan
makes such equipment.
That assessment of industrial production represented the first downgrade
since December. Previously, the government had said the recovery trend of
industrial production was stalling.
Saying consumer and capital spending were recovering, the government
retained its previous overall view of the economy, which it said was "recovering
moderately", though there was some weakness.
The government said it would need to pay full attention to effects of "price
increases, supply constraints and financial and capital market volatility."
Corporate profits were improving overall, but the pace of recovery had
become moderate, the report said, pointing to raw-material price increases
weighing on some manufacturers. That was the first downgrade in the assessment
of corporate profits since April 2020, contrasting with the previous description
of them "improving as a whole but with some weakness".
The government has allocated more than 2 trillion yen ($15 billion) from
reserve funds in the fiscal year to March 31 to cushion effects of rising
inflation. Measures will include fresh cash payouts to low-income households and
subsidies to curb personal electricity bills.
The report said the government expected the Bank of Japan to achieve its
price target, based on an assessment of economic activity, prices and financial
conditions.
Incoming governor Kazuo Ueda will join the BOJ next month when incumbent
Haruhiko Kuroda's term ends, but a global financial market rout this month has
complicated his task of smoothly ending the country's ultra-low interest rate
policy.
(Reporting by Kaori Kaneko; Editing by Bradley Perrett)
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