BOJ report shows economic revival
Source: Agencies |
July 5, 2011, Tuesday
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Print Edition
Print Edition
BANK of Japan Governor Masaaki Shirakawa said the world economy continues to recover albeit at a slower pace, taking a slightly more cautious view on global growth as signs of a slowdown spread to emerging economies.
But he maintained the central bank's view that while Japan's economy remains under downward pressure, mainly on output, there are indications it is picking up.
In a sign that the recovery is broadening, the BOJ also raised its assessment for seven out of nine regional economies, with most areas showing a pickup in output and household spending.
"Japan's economy will likely resume a moderate recovery as supply constraints ease further and output activity picks up," Shirakawa said in a speech to a quarterly meeting of BOJ branch managers yesterday.
The BOJ is growing increasingly confident that Japan's economy will recover from the devastation of the March 11 earthquake and tsunami by the end of this year as companies restore supply chains more quickly than expected.
Factory output in May jumped by the most in almost 60 years, while the central bank's latest quarterly tankan survey showed that companies expect an improvement in business sentiment in coming months and plan to increase capital expenditure. The BOJ is therefore expected to hold off on easing policy further at its rate review next week and to tone up its optimism on output and the economy, although it will strike a note of caution about signs of a global slowdown.
Some in the BOJ have become increasingly worried about softening global growth which, if prolonged, will hurt exports just when Japan is shaking off supply constraints in the autumn.
Shirakawa's acknowledgement of the global slowdown follows a warning by BOJ board member Yoshihisa Morimoto last month that global economic risks have heightened somewhat after a slew of weak US data.
But many in the central bank still do not expect the global slowdown to turn into a recession that would hurt exports.
"Output and private domestic demand are showing signs of picking up, as supply constraints start to ease and household and business sentiment improve somewhat," Shirakawa said.
"Japan's economy is experiencing a V-shaped recovery. But it's hard to be upbeat about the prospects after the V-shaped recovery," said Hideo Hayakawa, Osaka central bank branch manager. "There's a chance global growth will slow by the time supply constraints ease. That may cap Japan's recovery and mean that a V-shaped recovery might not last too long."
But he maintained the central bank's view that while Japan's economy remains under downward pressure, mainly on output, there are indications it is picking up.
In a sign that the recovery is broadening, the BOJ also raised its assessment for seven out of nine regional economies, with most areas showing a pickup in output and household spending.
"Japan's economy will likely resume a moderate recovery as supply constraints ease further and output activity picks up," Shirakawa said in a speech to a quarterly meeting of BOJ branch managers yesterday.
The BOJ is growing increasingly confident that Japan's economy will recover from the devastation of the March 11 earthquake and tsunami by the end of this year as companies restore supply chains more quickly than expected.
Factory output in May jumped by the most in almost 60 years, while the central bank's latest quarterly tankan survey showed that companies expect an improvement in business sentiment in coming months and plan to increase capital expenditure. The BOJ is therefore expected to hold off on easing policy further at its rate review next week and to tone up its optimism on output and the economy, although it will strike a note of caution about signs of a global slowdown.
Some in the BOJ have become increasingly worried about softening global growth which, if prolonged, will hurt exports just when Japan is shaking off supply constraints in the autumn.
Shirakawa's acknowledgement of the global slowdown follows a warning by BOJ board member Yoshihisa Morimoto last month that global economic risks have heightened somewhat after a slew of weak US data.
But many in the central bank still do not expect the global slowdown to turn into a recession that would hurt exports.
"Output and private domestic demand are showing signs of picking up, as supply constraints start to ease and household and business sentiment improve somewhat," Shirakawa said.
"Japan's economy is experiencing a V-shaped recovery. But it's hard to be upbeat about the prospects after the V-shaped recovery," said Hideo Hayakawa, Osaka central bank branch manager. "There's a chance global growth will slow by the time supply constraints ease. That may cap Japan's recovery and mean that a V-shaped recovery might not last too long."
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