Japan’s market conditions are improving: BOJ

Bloomberg and Reuters, TOKYO

Tue, Apr 16, 2013 - Page 15

The Bank of Japan (BOJ) raised its assessment of all its regions for the first time since July last year, citing a pickup in the global economy and resilient domestic demand, after unveiling unprecedented easing measures earlier this month.

The central bank became more upbeat about all nine regions, it said yesterday in the quarterly Sakura Report, the equivalent of the US Federal Reserve’s Beige Book. The report groups the nation’s 47 prefectures into nine geographic regions.

The upgrades highlight BOJ Governor Haruhiko Kuroda’s confidence in the world’s third-largest economy as household and company sentiment improve on a weakening yen and rising stocks and profits. The BOJ may raise its inflation outlook later this month, people familiar with the matter told Bloomberg News last week.

“Japan’s economy has stopped weakening and has shown signs of improvement,” Kuroda said yesterday at his first branch managers’ meeting in Tokyo, according to the central bank.

The BOJ’s easing “will lead Japan’s economy to overcome deflation,” he said.

Kuroda aims to achieve 2 percent inflation in two years. The bank will review its forecasts for prices and economic growth at a meeting on April 26.

The yen has fallen about 12 percent against the US dollar this year. It rose yesterday after a report showed Chinese growth unexpectedly slowed in the first quarter, fueling demand for haven assets. The Japanese currency added 0.5 percent to ¥97.91 as of 3:03pm in Tokyo after earlier touching ¥97.55, the strongest since April 4.

Kuroda also said that Japan’s financial system was stable and capital markets had been improving due to a decline in risk aversion and expectations for domestic policy.

The BOJ stunned global financial markets earlier this month, promising to inject about US$1.4 trillion into the economy in less than two years by buying government debt and risk assets to end 15 years of deflation.

Kuroda’s assessment of financial markets may do little to comfort investors who are worried that the size of the BOJ’s debt purchases could distort financial markets.

“Our financial system is stable overall, and monetary conditions are accommodative,” Kuroda said, according to a summary of his speech.

“A decline in risk aversion among global investors and expectations for domestic policy are helping markets improve,” he said.