TOKYO, June 17: The Japanese government on Monday left its key economic assessment unchanged, saying rising exports had halted the economic slide but slack corporate investment and consumer spending were holding back growth.

Rising exports were reflected in increased production, signs of a bottoming in corporate profit declines and an improvement in some employment indicators, the Cabinet Office said in its monthly report for June.

Earlier in the day, Prime Minister Junichiro Koizumi and the ruling coalition parties agreed to implement tax cuts in January as part of a second anti-deflation package aimed at lifting the nation from a decade-long slump.

Production was showing early signs of recovery in some areas due to an increase in exports and fewer inventory reductions, said a Cabinet Office official.

Corporate profits are showing signs of bottoming out, he added.

The Cabinet Office, which had upgraded its economic assessment for three straight months up to May, said last month manufacturers in particular were suffering a sharp decline in profits.

These signs of recovery which would be the fourth cyclical rebound since Japan’s bubble economy burst in 1990 appeared to be filtering down through the economy.

Overtime is increasing, though the employment situation remains severe. The rise in overtime will have a positive impact on wages in the future, said the official.

We are closely watching the development of new job offers, which turned upwards in April, posting growth of 6.8 per cent month-on-month after a fall of 0.3 recent in March, he said.

Private consumption remained flat although there was evidence of fresh demand in areas such as food and automobiles.

But falling investment by companies in factories and equipment was still a drag on recovery prospects, warned the government.

Corporate capital investment is declining and will remain on a falling trend, the office said.

The construction of new homes has fallen below the 1.15-1.12 million annualised rate considered to be the line between growth and contraction, due to a drop in new condominiums, particularly in Tokyo and Osaka.

The report said the increase in exports and re-stocking was expected to have benefits for the wider economy but demand would be curbed by high unemployment and weak wages.

Last week the Bank of Japan upgraded its assessment of the world’s second largest economy for the fourth straight month, saying it was showing signs of stabilisation due to the pick-up in exports. But the bank stopped short of announcing the economy’s slide had ended.

Japan’s ruling coalition parties pledged Monday to implement tax cuts in January to help fight deflation, but economists criticised a lack of detail in the plan and doubted they would be enough to significantly help the economy.—AFP