Japan government raises assessment of output, capex as economy expands

TOKYO (Reuters) - The Japanese government raised its assessment of industrial production for the first time in a year in further evidence of an economy growing at a steady pace, thanks to a strong tailwind of upbeat external demand.

That positive impulse to growth was also underscored by the government's upgrade of capital expenditure, the first in six months and signalled booming earnings for Japan Inc.

The monthly economic report for December backs revised data earlier this month that showed the world's third-biggest economy grew twice as fast as originally estimated in the third quarter, bolstered by a business spending splurge and buoyant exports.

It also marked the seven straight quarter of expansion for the economy, the best uninterrupted run of growth since 1994.

The Cabinet Office left unchanged for the seventh month in a row its moderately upbeat overall assessment that the economy remains on a recovery path helped by consumer spending and business investment.

"Japan's economy continues to recover moderately as a trend," it said.

Industrial output is "gradually expanding," the government said, an upgrade from last month's assessment that output is "recovering."

It said capital expenditure is also "gradually expanding," a more positive view from November supported by increased investment in hospitality and manufacturing.

The value of capital expenditure in the third quarter exceeded the peak seen before the global financial crisis, which is a sign that business investment has recovered, a Cabinet Office official told reporters.

The government retained its view on private consumption, saying it is "picking up moderately," and similarly on trade it kept intact its assessment that exports are "picking up."

Moving the other direction, the housing sector was downgraded - the first such lowering in almost a year due to a decline in construction of homes and flats.

The overall thrust of the report ties in with a flurry of data over the past month or so showing Japan's economy is humming along nicely, an encouraging sign for policy makers as they try to vanquish years of falling prices and sub-par growth.

Japan's government is expected to approve on Friday a record 97.7 trillion yen ($864.45 billion) budget for the 2018/19 fiscal year, government sources told Reuters.

The budget will spend more money on childcare and vocational training to keep more workers in the workforce and keep the economy growing into next year.

($1 = 113.0200 yen)

(Reporting by Stanley White; Editing by Shri Navaratnam)