The economy not only remains stagnant but faces increasing downward pressures, the Bank of Japan said March 17 in a report more pessimistic than its last.
Despite positive factors such as the planned injection of public funds into banks to boost their capital bases, the income environment for consumers is worsening and may cause domestic demand to fall further, the BOJ warned in its monthly economic report.
February's report had not mentioned these downward pressures. In its March report, the central bank also pointed to negative factors such as the decline in economic activity in Asia and the difficulties Japanese firms face when trying to secure bank loans.
The BOJ also cited the negative impact of higher unemployment, lower overtime wages and lower winter bonuses. Because commercial banks continue to be reluctant to extend loans in order to secure their long-term profitability and financial health, some firms, especially smaller ones, are facing difficult financing conditions, according to the report.