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The economy “remains stagnant,” the Bank of Japan said Tuesday in an even less optimistic view than it had in December, when the bank said economic growth had stalled.In its monthly economic review for January, the BOJ said sluggish domestic demand has had a negative impact on production, employment and income, and corporate sentiment has weakened.While net exports have continued to rise, business investment has increased modestly, mainly in the manufacturing sector. But private consumption remains stagnant, housing investment has continued to be weak and public investment has been falling, all adding to inventory adjustment pressures, according to the central bank.The BOJ expects the special tax cuts announced in December to lift household spending. Still the bank sees the economy remaining stagnant because of slower business investment growth, inventory adjustments and decreasing public investments. The central bank acknowledged financial institution are increasingly cautious in lending to firms, partly because capital adequacy constraints are tightening due to the falling yen and stock prices.

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