RTTNews - Monday, the Bank of Japan upgraded its regional economic assessment for the first time in three years. The central bank said economic conditions in the Japanese economy continued to be severe, but they started to stop worsening amid the slowing pace of deterioration.
Based on reports from the nine regions in Japan, the central bank in its quarterly Regional Economic Report for July said the pace of economic deterioration was slower in all regions compared with the previous assessments. However, most regions emphasized that their economies continued to be in a severe situation.
Among the nine regions, Hokkaido reported that its economy was stagnant. Meanwhile, Tohoku, Hokuriku, and Kinki assessed that their economic conditions were still severe. Kanto-Koshinetsu as well as Kyushu-Okinawa inserted after deteriorating significantly into their assessments.
The report summarizes data from all regional research divisions, mainly at the central bank's branches in Japan. Further, it is based on reports and other information collected for the central bank's branch managers meeting.
Due to the developments in inventory adjustments, exports and production started to turn upward, the report said. Still, they remain at a low level. Housing investment dropped and business investment eased substantially as corporate profits decreased significantly. At the same time, private spending stayed weak as the employment and income situation became increasingly severe.
All the nine regions reported that private consumption continued to remain weak, mirroring the increasingly severe employment and income situation. Compared with the prior assessment, most regions viewed that some policy effects had appeared, but private consumption stayed weak.
Many regions said the ongoing substantial fall in business fixed investment was due to the significant drop in corporate profits. Hokkaido, Tokai, and Kinki assessed that the pace of decline had accelerated, while other regions maintained their previous assessments.
Regarding production, regions witnessed an upward turn, though its level was still low and regional differences remained. The assessment in July found that production had stopped declining or had begun to stop declining in Hokkaido, Hokuriku, and Kinki, and had picked up or had begun to turn upward in Kanto-Koshinetsu, Tokai, Chugoku, and Kyushu-Okinawa.
The employment and income situation weakened. Compared to the previous assessment of employment, Kinki and Kyushu-Okinawa reported that the pace of deterioration had accelerated.
In an opening speech at the quarterly branch managers' meeting, the central bank governor Masaaki Shirakawa said the financial system has become calmer. He noted improvement in the commercial paper and corporate bond markets.
The central bank had raised its economic assessment for the second straight month in June. Upgrading the outlook, the BoJ said the economy is likely to show clearer evidence of leveling out over time in the coming months.
The government also upgraded its view on the economy for the second month in a row in June as exports and factory output recovered from sharp declines.
On Monday, a report from the Cabinet Office revealed a rise in the leading index that measures future economic activity. The index climbed to 77 in April from 76.2 last month. While, the coincident index rose to 86.9 from 86 in the prior month.
The latest quarterly Tankan survey from the central bank found that sentiment amongst large manufacturers rose to minus 48 in June from a record low level of minus 58 in the prior quarter. A negative reading indicates pessimists outnumber optimists.
Large enterprises plan to reduce their fixed investment by 9.4%, while medium sized firms intend to cut spending by 30.1%.
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