The Bank of Japan (BOJ) raised its economic assessment in four of the country’s nine regions as the nation recovers from its worst postwar recession.
“The economy had picked up in all regions, although regional differences in the pace and extent of the recovery remained,” the central bank said at a quarterly meeting of its branch managers in Tokyo yesterday. “Many regions continued to point to the low level of economic activity.”
The report helps Bank of Japan policy makers assess developments in the economy ahead of a board meeting next week. Governor Masaaki Shirakawa told the regional chiefs that the bank would persist with its policy of keeping borrowing costs near zero to overcome deflation and sustain growth.
The report underscores how exporters have led the recovery. The upgrades were in Kanto-Koshinetsu, Tokai, Kinki and Kyushu-Okinawa — regions where many of Japan’s biggest manufacturers are based. The bank kept its view unchanged in the remaining five areas — Hokkaido, Tohoku, Hokuriku, Chugoku and Shikoku.
All nine locations reported increases in industrial production and higher sales of cars and home appliances, thanks to government incentives to buy the products.
Even so, seven areas said consumer spending as a whole remained weak. All nine reported a “severe” labor market and said capital spending was either falling or at low levels because corporate profits were deteriorating.
Shirakawa said the central bank expects the pace of the recovery will remain moderate and exports and production will probably slow as global fiscal stimulus wanes.
“Japan’s economy is picking up, although there isn’t yet sufficient momentum to support a self-sustaining recovery in domestic private demand,” he told the branch managers.
Hideo Hayakawa, the Osaka branch chief, said larger companies in the region were looking abroad for business, while smaller firms and service providers “will continue to struggle” to attract customers at home.
“Companies doing business worldwide are giving up on the domestic market,” he told reporters. “That may indicate Japan’s employment and domestic demand will continue to languish even if exports and output increase.”
Osaka is home to electronics companies, including Panasonic Corp and Sharp Corp.
Hayakawa said government subsidies to encourage firms to retain workers have helped to stem job losses. Even so, “companies won’t move to hire new workers even if production rebounds. They’ll just try to handle increased orders with overtime and by reallocating workers in-house.”
Japan’s unemployment rate unexpectedly rose to 5.2 percent in November, the first increase after it hit a record 5.7 percent in July, adding to signs that employment growth may not be strong enough to support the recovery.
Japanese Finance Minister Naoto Kan said yesterday that the risk of a return to recession remains and the government was to attempt to pass its record ¥92.3 trillion (US$1 trillion) budget proposal as quickly as possible at a Diet session that convened yesterday.
Kan, who took the position this month, has indicted he wants the central bank to do more to bolster prices and support the economy.
The central bank has kept the benchmark interest rate at 0.1 percent since December 2008.
It unveiled a ¥10 trillion lending program last month, a move Kan praised as helping to weaken the yen from a 14-year high against the dollar.
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