Bank of Japan Gov. Toshihiko Fukui said Thursday he remains confident the economy is on a recovery track, although the information technology sector continues to be bogged down by inventories.
"Corporate sentiment seems somewhat cautious due to inventory adjustments in IT-related sectors, but production is coming back to normal levels," Fukui said in his speech to a quarterly meeting of BOJ branch managers held at the central bank.
Rising inventories of digital gadgets and price hikes for raw materials have fueled concerns that the economy may again be slowing down.
At the last branch managers' meeting in January, Fukui said output was declining.
Fukui's comments echoed the views expressed in the BOJ's Regional Economic Report, released the same day.
"The economic assessments of seven out of nine regions indicated that the economy was on 'a gradual recovery trend,' " the report says. The report also says economic activity in the other two regions -- Hokkaido and Tohoku -- remained virtually flat.
Regarding IT-related inventories, a survey conducted by the central bank on 170 IT firms nationwide showed many respondents feel incoming orders and production are recovering because of curbs on production and reduction of inventory. The results were included in Thursday's report.
"As long as the overseas economy is firm, many (IT-related) companies expect the inventory adjustment phase to be over by the end of summer," Eiji Muto, chief of the BOJ's Osaka branch, told a news conference after the one-day meeting.
Many firms also said they were paying close attention to any impact the anti-Japan protests in China and South Korea will have on the regional economies, since many firms have production lines in those countries, he said.