The Bank of Japan on Friday released an economic assessment that for the second consecutive month was slightly less bleak, saying moderate deterioration will continue for “quite a while.”
“Japan’s economy still continues to deteriorate as a whole, but the pace has moderated somewhat,” the central bank said in a monthly report on recent economic and financial developments.
In its previous report for March, the BOJ eased its assessment for the first time in 20 months, saying, “The economy still continues to deteriorate as a whole, although the downward pressure from exports and inventories is gradually abating.”
In the latest report, the BOJ said the economy will eventually hit bottom through an increase in production and a rebound in corporate profits.
“Overall, the economic deterioration in Japan is projected to come to a gradual stop, as production stops declining and turns up, reflecting the improvement in exports,” the report says.
However, the report warns against optimism as export recovery is expected to be modest for a while. Also, there are various uncertainties regarding the pace of overseas economic recovery, while domestic demand is expected to remain weak for some time, it says.
“Consequently, it will take quite a while for the economy as a whole to stop declining,” the central bank noted.
The BOJ said industrial production appears to have stopped declining and the deterioration in companies’ business sentiment, mainly among manufacturing firms, has almost ceased.
As for the outlook on exports, the BOJ said synchronized inventory adjustment worldwide in information technology-related goods is coming to an end, and overseas economies, particularly the United States and East Asian nations, are likely to follow a recovery path.
“Under these circumstances, exports are expected to pick up moderately for the time being,” the BOJ said.
With respect to domestic demand, fixed investment by businesses is expected to follow a downtrend for some time, while private consumption is also likely to remain lackluster due to worsening unemployment and lower incomes.
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