Japan's Economic Minister: Economy Continues To Recover

Japanese Economy Minister Hiroko Ota said Monday that the country's economic recovery is expected to continue despite weaker-than-expected growth data, but she hinted that she wants the Bank of Japan to be cautious in making policy.

"While the pace of economic recovery has slowed, I expect the recovery led by private demand will continue," Ota said at a press conference. The economy minister also said she expects the BOJ to make policy after considering various factors when the central bank holds its policy-setting meeting Aug. 22-23. "I believe the BOJ will make a decision after considering various factors, including the (gross domestic product) data," she said. Her comments on the data's implications for the bank's policy-making come amid rising global concerns over financial market stability triggered by U.S. subprime loan issues. While avoiding making direct demands for the bank's policy-making, Ota appeared to urge the bank to be careful in raising interest rates. According to Cabinet Office data released earlier in the day, Japan's GDP, or the total output of goods and services, grew a price-adjusted 0.1% from the previous quarter, or an annualized 0.5%, in the three months through June. Analysts had expected a 0.2% on-quarter growth. Ota said the slowdown was mainly due to weak consumption growth as a result of a weaker increase in workers' income. "Consumption overall remains on a recovery track. But the still-slow income growth has resulted in weak consumption during the period," Ota said. But the economy minister said strength in other private sectors will likely continue to underpin the current growth. "Corporate investment is strong and their earnings are also good...These will help sustain the current recovery." She also repeated that an exit from deflation is in sight but that "it's not over yet." Ota cited the U.S. economy and oil prices as downside risk factors for the Japanese economy. "The impact on Japan's real economy from the U.S. subprime loan problem isn't serious for now. But I will closely monitor how it will affect financial markets and consumer and business sentiment down the road," she said.