Regional economies have continued to worsen in many parts of the country as personal consumption and capital investment have either remained sluggish or declined, Bank of Japan branch heads said April 20.
At the outset of a quarterly meeting of BOJ branch managers in Tokyo, central bank Gov. Masaru Hayami emphasized that the economy remains under strong downward pressure and that the BOJ will maintain its current easy monetary policy.
Eiichiro Kinoshita, manager of the BOJ’s Osaka branch, told an afternoon news conference that the economic climate in Osaka, Wakayama and Nara prefectures is deteriorating with no indication of future improvement. “It is difficult to expect the economy will stop worsening during the first half of this year,” Kinoshita said, adding, however, that such prospects do not discount the effects of the government’s 16 trillion yen stimulus package.
While exports of machine tools and electronic appliances to the United States and Europe are increasing, those of audiovisual goods and automobiles to troubled Asian economies are decreasing, he said. The Asia factor has led to a tapering-off of overall exports from the Osaka area, according to Kinoshita.
But he denied that the Osaka economy has fallen into a deflationary spiral — a situation in which weak consumption causes prices to decline, aggravating corporate profits and increasing unemployment. “Big firms have not cut their employment on a large scale yet,” he said, adding that their capital investment is not dropping sharply.
The economy of the Tokai region appears to be worse than others because its manufacturing sector, including automobile makers, is large relative to its size, said Yoshiharu Obata, manager of the Nagoya branch. “The cycle among production, income and spending has probably begun rotating backward,” Obata told reporters. But he denied the situation is so serious to be considered a deflationary spiral.
Hayami stressed to the branch managers the need for both the central bank and commercial financial institutions to regain confidence. “We must take necessary measures without delay to regain trust. We need to review the way the bank operates and clarify the authority and responsibilities (of central bankers),” he said.
The meeting of the bank’s domestic branch and New York, London and Hong Kong office managers was the first Hayami has attended as BOJ head since he took office late last month.
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