The Bank of Japan said yesterday the country’s economic recovery “has paused” because of the slowing global economy, as it left its key rate unchanged at between zero and 0.1 percent.
“The pick-up in Japan’s economic activity has paused, mainly due to the effects of a slowdown in overseas economies and of the appreciation of the yen,” the bank said after a two-day policy meeting.
“Improvement in business sentiment has slowed on the whole despite steady improvement in domestic demand-oriented sectors,” the bank said in a statement.
It said the eurozone crisis poed a serious risk to the world economy.
“The sovereign debt problem in Europe could result in weaker growth not only in the European economy, but also in the global economy, particularly through its effects on global financial markets,” the central bank said.
Many analysts expect the central bank to take further easing steps — such as expanding its asset-buying facility — over coming months amid increasing global economic strife, especially in Europe.
Reflecting the global uncertainty and persistent strength of the yen, which has hovered near post-war highs for months, the bank’s quarterly Tankan survey of sentiment in major Japanese manufacturers plunged this month to “minus four,” from positive “two” in September.
The figures represent the percentage of companies saying business conditions are good minus those saying conditions are bad. The survey is taken into account by the Bank of Japan when formulating monetary policy.
“As for the outlook, Japan’s economic activity will remain more or less flat for the time being,” the bank said. “After that, the economy is expected to return to a moderate recovery path as the pace of recovery in overseas economies picks up, led by emerging and commodity--exporting economies, and [as] reconstruction-related demand after the earthquake disaster gradually materializes.”