Growth in the economy remains flat amid “substantial uncertainty” about the outlook, the Bank of Japan said Monday in its monthly economic and financial report for February.
The BOJ said an expected increase in exports eventually will lead to an uptrend in production, which in turn will initiate momentum for a recovery.
However, production is expected to remain flat for the time being because companies are continuing to eliminate jobs and debts, it said.
Adding to uncertainties about the economy’s future course is the downside risk to the outlook of overseas economies, it said.
“There are some uncertain factors, including geopolitical developments and their economic implications,” the BOJ said, apparently in reference to the rising global tension concerning Iraq.
The central bank predicted import prices will likely remain firm for the time being due mainly to rises in crude oil, but domestic corporate goods prices are likely to continue along a gradual decline.
The pace of year-on-year decline in consumer prices is expected to slow somewhat, the BOJ said.
“This is because the year-on-year change in prices of petroleum products is expected to become positive, and medical costs are projected to rise from April due to public insurance reforms,” it said.
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