A marked slowdown in Japan's economic growth in the second quarter was merely a "pause", but an abundance of data suggests the nation's recovery is intact, Economics Minister Heizo Takenaka said on Sunday.
Takenaka's comments echoed views of most private-sector economists, but they came amid growing worries about sluggish stock markets world-wide, higher oil prices and an apparent softening in China's economy.
"Japan's average growth cycle in the post-war era has been about 30 months. We're in the 31st, 32nd month of expansion, and that's why some people are saying some sort of consolidation is due," Takenaka said in a talk show on TV Asahi.
"But my conclusion is that I don't agree. It's just a pause within an uptrend, resulting from a number of temporary factors."
Earlier this month, preliminary data showed Japan's gross domestic product (GDP) grew just 0.4 percent in the April-June quarter, or an annualised rate of 1.7 percent.
This was well below economists' consensus forecast for an annualised rate of about four percent and sharply slower than the 6-7 percent pace in the previous two quarters. Flat capital spending was widely blamed for the deceleration.
Takenaka said slow demand for transportation equipment due to a recall scandal at a major truck maker was one factor that had hit capital spending. A major urban re-development project around Nagoya station in central Japan, which boosted January-March figures but had an adverse effect in April-June, was another.
"We are watching very closely where capital spending is going. Machinery orders, which are a leading indicator of capital spending, are not bad and we don't think spending would just falter from here," Takenaka said.
He said inventories remained at historically low levels and that the economy was unlikely to be dragged down by a glut in unsold goods.
On worries about a sharp slowdown in China, Takaneka said the authorities in Beijing so far appeared to be successful in managing a soft-landing.
"They have gradually tightened policy and that's producing results - excessive capital spending in certain overheated sectors is being contained," he said.
"China doesn't have the sort of tested-and-tried monetary policy means that the developed countries have, so we are looking at it carefully. But so far, everyone seems to feel that the policy steps are having a positive effect."
On oil prices, which rose to record highs just below $50 a barrel last week, Takenaka referred to an International Energy Agency (IEA) estimate that a $10 rise would depress Japan's economic growth by 0.4 percentage point.
"The important thing is how long the higher prices would continue," Takenaka said.
"Oil prices may spike up for various reasons in the short run. What we have to be careful about is not to let it go on for a long period of time." While Japan's economy has reduced its vulnerability to higher oil prices over the last few decades, its main trading partners in Asia were still not as efficient in energy usage, Takenaka asserted, citing IEA's estimate that a $10 rise in oil prices would depress Asia's economy by 0.8 percentage point.
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