Bareksa.com - Japan's government raised its view on private consumption on Friday, saying some signs of a pickup are being seen, signalling confidence about domestic demand despite the pain from a national sales tax hike in April.

It was the first time in five months that the government raised its view on personal consumption, which accounts for about 60 percent of the world's third-biggest economy. The sales tax was increased to 8 percent from 5 percent on April 1.

In April, the government downgraded its view on private consumption after the tax hike dampened domestic demand. Recent data has shown sales at retailers including some household appliances picking up, prompting the government to raise the assessment, a government official said.

"Private consumption shows weakness but some signs of pickup are seen," the government said in its monthly report for June. That compared with its previous view that private consumption showed weakness due to the pullback in demand after the tax hike.

The government stuck to its view that the overall economy is on a moderate recovery trend despite some weakness related to the tax hike.

The government's optimism echoed that of the Bank of Japan, which last week maintained its assessment that the economy continues to recover moderately as a trend, while offering a slightly more upbeat note on overseas growth.

However, in a sign of concern about exports - now a weak spot - the government again flagged a slowdown in overseas economies as a downside risk to the Japanese economy.

The government maintained its view on exports, saying they are flat, in line with the central bank's view, but it cut its assessment of imports reflecting drop in domestic demand after the sales tax hike.

It described imports as "weakening", compared with its previous description as being flat.

Exports and imports both fell year-on-year in May for the first time in more than a year, data showed this week, reflecting weak demand at home and overseas, and in Asia in particular.

Policymakers and private-sector analysts expect the economy to slump in the current quarter due to the sales tax hike, but it is seen resuming a modest recovery in the following quarter.

(Source : Reuters)