TOKYO, Jan 18: Japan’s government downgraded its key economic assessment on Friday for the third straight month due to slack factory production and consumer spending, although exports were seen offering a glimmer of hope.

While movements of an incipient recovery can be seen in some areas, the state of the economy has weakened somewhat, the Cabinet Office said in its January assessment.

Industrial production has eased somewhat, it said. In December the government described output as flat.

The Ministry of Economy, Trade and Industry said earlier Japan’s industrial output for November fell 1.6 per cent, in figures revised from an initial estimate of a 2.2 per cent decline.

The overall trend remains in decline, amid unstable demand conditions and declining inventories, said JP Morgan economist Ryo Hino.

The Cabinet Office also highlighted concerns over consumer spending — which comprises over half of gross domestic product — as wages continue to fall and companies are forced to cut more jobs.

Struggling Japanese construction firm Hazama said Friday it would slash over 1,000 jobs in the next three years under a restructuring plan.

But it was not all bad news for the world’s second largest economy with the decline in exports tapering off amid stirring demand for Japanese products in the United States and Asia.

Exports were seen as flat in January after being described as in decline in the previous month.

It is possible that weakness in overall economic activity may be temporary, therefore we maintain a scenario which calls for a pick-up in the near future, said a senior economist at the Cabinet Office.

In the short-term Japan’s economy would continue to follow a gradual recovery track, provided the United States and other major economies continue to pick up, the assessment said.

There were, however, risks of a further decline.

There are concerns that the uncertainty surrounding the future of the global economy, and the sluggishness of domestic stock prices, may still exert downward pressure on final demand, the report said.

Japan’s influential Council on Economic and Fiscal Policy has pushed back the date it sees real economic growth reaching at least 1.5 per cent by two years to the year to March 2007, the Nihon Keizai newspaper said earlier.

The report, which would be finalised on Monday, maps out the course of economic and fiscal management for the next five years, the daily said. —AFP