With unemployment high, capital expenditures slowing and exports and production entering the doldrums, the Bank of Japan had little good news to report after its quarterly meeting of branch offices Monday.
BOJ Gov. Masaru Hayami opened the meeting by repainting his gloomy portrait of the current state and outlook for the economy.
“The nation’s economic recovery is stalling due to deceleration in exports . . . and will likely remain stagnant for some time,” Hayami said.
Weak demand threatens to intensify deflationary pressures, requiring careful attention, Hayami said. Consumer and wholesale prices will also likely remain weak for the time being, he said.
The meeting, involving managers from 33 branch offices nationwide and from BOJ offices in London, New York and Hong Kong, was the first since the central bank conducted a series of monetary easing steps last month. On March 19, the BOJ increased the target for banks’ reserves and boosted liquidity with in increase in outright purchases of outstanding government bonds.
Although businesses in the Kansai region applauded the credit-easing steps, few expect an immediate improvement, said Takahiro Mitani, executive director of the central bank’s Osaka branch.
“In general, the sentiment is that (the BOJ action) will not mean that banks will now be generous to companies with difficulties,” Mitani said.
With the government calling on major banks to speed up writeoffs of their nonperforming loans, regional banks are likely to follow suit, dragging down local economies further, he said.
On the outlook for Kansai, Mitani said exports will not recover until the July-September quarter at the earliest, due to slowing exports of information-technology-related products to the U.S. and southeast Asia.
The weaker yen, which enables goods to be sold more cheaply abroad, does not automatically mean good news, Mitani said, because more companies are producing their goods overseas.
Reports from branches in other parts of the country brought more bad news.
In Hokkaido, “downward pressures are stronger and company outlook is deteriorating somewhat.”
In Tohoku, capital investments to upgrade electric equipment will drop by 20 percent this year.
In Kyushu, the local economy is stalling due to a large decrease in exports, and a decline in capital investment is stifling any gains.
“In some industries, companies continue to expand their factory capabilities, but large decreases in investment in the retail and transport industries will offset negate these increases,” according to the Kyushu report. “Capital expenditures overall will remain stalled.”
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