Bank of Japan Gov. Toshihiko Fukui voiced optimism Monday over the Japanese economy, citing a series of recovery signs.
At a quarterly meeting of BOJ branch managers in Tokyo, Fukui said the nation's banking system is also gradually regaining stability.
To sustain the recovery trend, he said the central bank would continue to employ an ultra-easy monetary policy to spur private-sector economic activity.
Fukui said that corporate equipment investment is continuously rising, and that a decline in household income is gradually coming to a halt. Personal consumption is also showing a relatively strong recovery, he said.
The nation's economy is likely to maintain the current pace of recovery, Fukui said.
But Fukui also cited some negative factors that could slow down the ongoing recovery.
He said production costs might continue to rise due to high crude oil prices and an increase in prices of metal and steel products. A rise in production costs would cause a rise in consumer prices, which could slow down consumption.
He said that for the time being, consumer prices are likely to decline slightly because temporary factors that had pushed up consumer prices, such as high rice prices due to a poor harvest last year, are disappearing.
Eiji Muto, general manager of the BOJ's Osaka branch, said the ongoing economic growth in the Kansai region is being led by strong exports to China and growing domestic consumption of digital home appliances, such as flat-panel TVs and digital cameras.
"Kansai has almost wiped out the negative image of the region, which is suffering from prolonged economic slowdown," Muto said.