The Bank of Japan (BOJ) raised its economic assessment of seven of the country’s nine regions as the nation recovers from a record earthquake.
Tohoku, the northern region that was hardest hit from the March 11 earthquake and tsunami, was among the areas where conditions are improving, the central bank said yesterday in its quarterly Sakura report, the equivalent of the US Federal Reserve’s Beige Book.
The BOJ left its evaluation of the Kinki and Shikoku areas,which are both west of Tokyo, unchanged.
The report adds to evidence that the economy is rebounding from the natural disaster that left more than 22,000 people dead or missing. Industrial production rose at the fastest pace in more than 50 years in May and a central bank report last week showed companies expect profits to rebound later this year.
The northeast is making progress in restoring production and business facilities, today’s report said. The Kanto area, home of the nation’s capital, has been showing some signs of improvement thanks to an easing in supply constraints. Consumer spending has been picking up around the nation, the report said.
Bank of Japan Governor Masaaki Shirakawa said yesterday the world economy continues to recover, albeit at a slower pace, taking a slightly more cautious view on global growth as signs of a slowdown spread to emerging economies.
However, he maintained the central bank’s assessment that while Japan’s economy remains under downward pressure, mainly on output, it is showing signs of picking up.
“Japan’s economy will likely resume a moderate recovery as supply constraints ease further and output activity picks up,” Shirakawa said in a speech to a quarterly meeting of BOJ branch managers yesterday.
“Output and private domestic demand are showing signs of picking up, as supply constraints start to ease and household and business sentiment improve somewhat,” he said.
The BOJ is expected to hold off on easing policy further at its rate review next week and to tone up its optimism on output and the economy, although it will strike a note of caution about signs of a global slowdown.
The bank is also expected to cut its economic forecast for the current fiscal year that began in April when it conducts a quarterly review of its long-term projections at next week’s rate review, sources familiar with the bank’s thinking said.
However, this would be a technical revision reflecting the steep contraction in January-March GDP and revisions to last year’s figures, and would not affect monetary policy or the BOJ’s view that growth will pick up toward the end of this year, they said.
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