The economy will regain its recovery pace after a temporary slowdown, Bank of Japan Gov. Yasuo Matsushita said Oct. 20.Presenting the central bank's half-year assessment of the economy during a two-day meeting of BOJ branch managers at the bank's head office in Tokyo, Matsushita said export and fixed investment support the economy, though the consumption tax hike and other fiscal policies have negatively affected consumption and production."On the whole, the basis for a modest recovery has not been undermined," he said. But he pointed the need to closely monitor the recovery of personal consumption and the degree of inventory adjustment.He then said the BOJ's priorities should still be set on consolidating the ground for economic recovery, suggesting the central bank would maintain its ultra-easy monetary policy for the time being. The official discount rate, which is the rate the BOJ charges commercial banks for borrowed funds, has stood at a historic low of 0.5 percent since September 1995.The governor also said it has become more important for the government to press ahead with structural reform, including deregulation, because businesses are in a state of caution in the present economic climate.The BOJ's Osaka branch manager said Oct. 20 that domestic demand in the Osaka area is sluggish, a downward assessment from the previous BOJ branch managers' meeting in July. Eiichiro Kinoshita told a Tokyo news conference that household expenditures have remained stagnant, public investment is on the decrease and private-sector fixed investment lacks momentum.Meanwhile, buoyant exports have kept production from leveling off. "Personal consumption has not recovered at an expected pace" from the decrease initially caused by the consumption tax hike in April, Kinoshita said. Consumer concerns about future uncertainties, rather than their incomes, have psychologically led to the recent decline in consumption, the Osaka manager said in regard to local firms' views. "(The firms said) the sluggishness in consumption became clear in August," according to Kinoshita.At his July news conference, Kinoshita expressed more optimism in the regional economy, saying it was on a moderate recovery path. Exports to the Southeast Asian countries caught in currency crises are stagnant, but shipments of electric parts and other products for the United States and Europe remain favorable, he said.