The Bank of Japan warned Thursday that risks to the global economy, including heightened trade tensions between the United States and China, are beginning to have an adverse effect on Japanese companies.
In a quarterly report on the nation’s regional economies, the central bank said the impact of the ongoing trade war between the world’s two largest economies has been limited so far but that “a gradually increasing number of firms are pointing to some effects, such as a decline in orders.”
The BOJ, meanwhile, upgraded its assessment of two regions that have been recovering from a series of natural disasters last year: Hokkaido, which was hit by a magnitude 6.7 earthquake that caused an island-wide blackout in September, and the western Chugoku region, where flash floods killed more than 200 people in July.
It kept unchanged its assessments of the rest of the country’s nine regions: Tohoku, Hokuriku, Kanto-Koshinetsu, Tokai, Kinki, Shikoku and Kyushu-Okinawa.
The central bank cited a number of companies across various industries voicing worries over the trade battle, which has already seen the United States and China raise tariffs on hundreds of billions of dollars in each other’s products.
“Orders from China have been slowing. We’re concerned that if the U.S.-China trade friction becomes more intense, demand will continue to weaken,” a manufacturer of production machinery based in the Kanto-Koshinetsu region was quoted as saying.
“We’ve postponed investing in capacity expansion due to concerns of a further Chinese downturn,” said an electric machinery-maker in the Chugoku region.
The Sakura Report, named after its cherry blossom-colored cover, is released every three months following a meeting of the BOJ’s regional branch managers. It is the Japanese equivalent of the U.S. Federal Reserve’s Beige Book.
At the meeting, BOJ Gov. Haruhiko Kuroda said Japan’s economy is expected to continue expanding moderately as wage increases lead to more spending.
The central bank will continue to keep interest rates extremely low until inflation rises to its 2 percent target, he said.
“We will continue to make the necessary policy adjustments to maintain momentum toward our price stability target … while inspecting the relevant risks and assessing economic, price and financial conditions.”