Japan warns of market fluctuations, says economy picking up moderately

TOKYO Japan's government warned that there should be attention to the impact of financial market fluctuations on the economic outlook, while acknowledging its belief that the economy is moderately recovering.

The warning shows Tokyo's continued concern about market fluctuations a week after it intervened in the foreign exchange market to buy yen for the first time in more than 20 years as it tried to stop the currency's sharp falls.

The government kept its assessment of economic conditions intact from the previous month, saying the economy was picking up moderately, according to a monthly report issued on Friday.

The government did not change its assessment of the economy and its components, such as private consumption, for the first time since November 2018.

The government warned that a slowdown in overseas economies was a downside risk for the world's third-largest economy. The private survey showed that new manufacturing orders in Japan shrank at the fastest rate in two years this month.

The government warned that there should be attention to the economic impact of rising prices, supply constraints and fluctuations in financial and capital markets in the report.

The yen has weakened considerably when looking at the trend in the foreign exchange market since August, a Cabinet Office official told reporters ahead of the publication of the report.

There was a situation where day-to- day fluctuations and volatility were quite high. The yen's moves against the dollar makes it hard for firms to formulate business plans due to the insecurity about how the yen makes it hard for them to formulate business plans, the official said.

Japan's economy grew for a third straight quarter in April-June, increasing an annualised 3.5 per cent in the quarter as the lifting of local COVID 19 restrictions boosted spending by both companies and consumers.

The recovery from a Pandemic-induced slump has lagged other major economies.

In addition to that, high commodity prices and the weakening currency are boosting import costs, increasing the likelihood that households will have to pay more for goods and cut back on other spending.