BOJ cuts view on regional economies, Shirakawa pledges strong easing+

TOKYO, Jan. 17 Kyodo -
The Bank of Japan downgraded Monday the assessments on almost all regional
economies in the country, citing weak exports and industrial output, with its
Governor Masaaki Shirakawa pledging efforts to fight deflation through
comprehensive monetary easing.
In its quarterly report, released after the meeting of the central bank's
branch managers, the BOJ cut the evaluations on seven of nine regions. ''Many
regions in Japan judged that there were signs of a moderate recovery on the
whole, but seven regions...reported that the recovery seemed to be pausing or
had paused recently,'' it said.
It was the first time since April 2009 that the BOJ had downgraded seven
regions at once. The previous survey, conducted in October, lowered only three
of nine regional evaluations.
The seven are Hokkaido, Hokuriku, Kanto-Koshinetsu, Tokai, Kinki, Chugoku and
Shikoku. For the remaining two, Tohoku and Kyushu-Okinawa, the BOJ kept its
assessments on hold.
Adjustment for inventories in the information-technology sectors abroad has
slowed the exports and production of Japanese manufacturers, the report said,
while the falling demand for some durable consumer goods, which coincides with
the diminishing effects of the government's fiscal stimulus measures, has
weighed on business sentiment in many regions.
''Production had recently declined slightly in most regions,'' the report said,
adding that in the Tokai region including Aichi Prefecture, where Toyota Motor
Corp. is based, the output of vehicles and auto parts particularly declined.
Carmakers and related industries had significantly slowed their production,
affected by the end in September of the government's subsidy program, which had
been introduced as part of the pump-priming measures, for the purchases of
environmentally friendly vehicles.
In addition, the government in December scaled down another incentive program
to support those who purchase energy-efficient appliances before the program
expires in March.
The move temporarily sparked a surge in demand for the designated products but,
as experts warned, soon led to sharp falls in consumer spending and retail
sales.
''While many regions reported signs of picking up such as in sales of winter
apparel, all regions pointed to a decline in demand following a last-minute
increase ahead of the expiration of policy measures,'' the report said.
But it also pointed to such brighter aspects as recovery in corporate capital
spending and the signs of reaccelerating industrial output in China and other
Asian economies, which in turn could affect Japanese production and exports.
''It seems we are not so far away from the point where (the economy) would
break away from the current lull,'' Hideo Hayakawa, head of the BOJ's Osaka
branch, said at a press conference.
Still, Hayakawa warned it is too early to expect business investment to fully
recover in 2011, despite their improving profitability. He said Japanese firms
are increasingly considering shifting their production bases overseas, seeking
cheaper labor costs among other reasons.
As the 32 branch managers gathered for their one-day meeting at the BOJ
headquarters, Shirakawa told them that the Japanese economy has been
recovering, but added the growth continues only at a limited pace and seems to
be ''taking a breather'' amid weak consumption and production.
The expression was almost matching the one the government has recently employed
in its monthly assessments, describing economic activities as ''pausing.''
He then stressed the BOJ will ''patiently continue to make contributions a
central bank can in order to bail the Japanese economy out of deflation and
ensure its return to a sustainable growth track under price stability'' with
such measures as ''strong monetary easing.''
The BOJ has maintained its key short-term interest rate effectively at zero
percent to boost the economy while pumping money into the financial system
through such unusual methods as purchasing riskier assets from banks. His
comment on Monday suggested the bank will keep the policy at least for the
foreseeable future.
==Kyodo
2011-01-17 23:43:50


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