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Japan's government lowered its assessment of the economy for the first time in 15 months, saying growth will moderate as exports and production cool.

“The economy is recovering at a moderate pace recently,'' the Cabinet Office said today in its monthly economic report for February. In January, the government said “the economy is recovering, while some weaknesses are seen.''

Reports in the past month have showed the nation's longest postwar expansion is cooling after growth accelerated in the fourth quarter. Industrial production rose less than economists estimated in December, and exports to the U.S., Japan's largest market, fell for a fifth month in January.

“We need to consider the possibility that Japan may enter a lull in the economy,'' though it's unlikely for now, Economic and Fiscal Policy Minister Hiroko Ota said at a press conference in Tokyo today. “We need to watch developments in the U.S. economy,'' the epicenter of turmoil in the world's financial markets, which is leading a global slowdown.

The Cabinet Office lowered its assessment of output for the first time in eight months, saying it's “growing at a slower pace,'' after describing it as “increasing moderately.''

Production rose 1.4 percent in December, less than the 2 percent increase forecast by economists. Manufacturers surveyed said they plan to cut spending in January and February.

The government also cut its evaluation of exports for the first time since September 2006, saying they're increasing “moderately'' even after a report yesterday showed growth in shipments accelerated in January paydayloans.

Exports to the U.S. declined 3.2 percent in January, while overall shipments grew 7.7 percent, supported by demand in Asia and Europe, a government report showed yesterday.

Waning U.S. Demand

Waning demand in the U.S., the world's biggest economy, will eventually take its toll on the emerging markets where Japan ships about half its goods, Ota said last week.

The government also lowered its assessment of the global economy, including the U.S. and the euro region.

“Attention should be paid to downside risks'' resulting from the slowing U.S. economy, turmoil in financial markets and rising oil prices, the government said.

The Bank of Japan said last week in its monthly report that growth is slowing temporarily and lowered its assessment of the global economy. It cut its evaluation of Japan's economy in December, the first reduction in three years.

The last time the government became more pessimistic about the economy was in November 2006, when it said there was “some weakness in consumption.'' Household spending fell every month that year.

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