Japan's Cabinet Office held its headline call steady in the August edition of its Monthly Economic Report: the economy is "recovering at a moderate pace," language unchanged from recent months. The notable shift is one of emphasis, not direction. The report flags "the situation in the Middle East and natural disasters" as risks to that recovery, then repeats the Middle East caveat a second time when describing corporate profits.
Component by component, the picture stays upbeat. Private consumption, business investment, exports and the employment situation are all described as "picking up" or showing "movements of improvement." Consumer prices are "rising moderately." The lone holdout is industrial production, which the report calls simply "flat".
Behind the qualitative language sit some hard numbers. Real GDP grew 0.3% quarter-on-quarter in the April-June quarter, an annualized 1.1%, the third straight quarter of expansion, while nominal GDP has now risen for nine consecutive quarters. The unemployment rate held at 2.5% in June. Corporate bankruptcies stayed roughly flat too, at 1,021 cases in June and 1,028 in July, with July liabilities of ¥236.3bn.
Markets got a passing mention as well: the Nikkei Stock Average rose from the 61,800-yen level to 69,200 before slipping back to 65,800, and the yen moved from 163 to the dollar to 156 before depreciating again to 159.
None of this changes Tokyo's policy posture. The government reiterated it will implement the current-year budget and supplementary budget "in an appropriate and flexible manner" and continues to defer to the Bank of Japan on reaching the 2% inflation target "in a sustainable and stable manner". For readers tracking Japan's business cycle, the August report offers no numerical surprises, only a second Middle East flag sitting next to corporate profits that was not quite as prominent before.