Japan downgrades economy

Japan’s government downgraded its assessment of the economy for the first time in three months while a former International Monetary Fund chief economist expressed concerns about the US’ expanded deficits.

Japan’s Cabinet Office said yesterday the economy is recovering at a moderate pace, although some components are showing sluggishness.

This marks the first overall downgrade since November, when a note was added to suggest that the recovery seemed to be “partially” stalled.

The government’s latest appraisal indicates that the economic recovery is likely to remain tepid after the economy unexpectedly slipped into recession at the end of last year, dragged down by anemic domestic demand.

The government cut its view on production for the first time in 11 months, citing a drop in manufacturing activities, with some automakers temporarily halting production and shipments.

Daihatsu Motor, a wholly-owned subsidiary of Toyota Motor, had to suspend domestic production and deliveries of multiple models from December over a vehicle certification scandal.

This came as economist Olivier Blanchard said the US is in danger of a fiscal crisis erupting after ballooning deficits in recent years.

Blanchard said he is concerned about the attitude in Washington to eye-watering US government deficits.

“In the US, I’m very worried because the primary deficits are very large and there’s absolutely no attempt to decrease them in any way, shape or form,” he said.