The Bank of Japan on Thursday raised its forecast for the nation’s real economic growth for fiscal 2010 to 2.6 percent from 1.8 percent projected in April, as stronger-than-expected demand in emerging countries has boosted exports and production.
During its two-day policy meeting that ended the same day, the BOJ also maintained its economic assessment with a statement issued after the meeting saying the country is seeing “further signs of a moderate recovery.”
The central bank left its key interest rate unchanged at 0.1 percent as part of efforts to overcome deflation.
As for the outlook, BOJ Gov. Masaaki Shirakawa said after the meeting that the economy is on a recovery trend despite the yen’s rise and decline in stock prices, but noted that downside and upside risks are both increasing compared with three months before.
“Growth prospects will likely be higher for fiscal 2010 mainly due to acceleration of growth in emerging economies, but remain broadly unchanged for fiscal 2011,” the BOJ said in a statement, comparing with the projections presented in the April report on the outlook for economic activity and prices.
The central bank also said, “Attention should be paid” on how the European financial woes and the instability in international financial markets impact the global economy, citing them as possible downside risks.
Shirakawa said that both upside risks, such as faster growth in emerging economies, and downside risks are “somewhat increasing.”
But he also said, “I think our country’s economic outlook points to a recovery trend, although the influence of the yen’s rise and falling stock prices may serve as pressure.”
A BOJ survey in June showed that business confidence among major Japanese manufacturers has turned positive for the first time in two years.
The latest assessment is also in line with the government’s revision in June of its fiscal 2010 growth projection to 2.6 percent from 1.4 percent estimated in December.
The central bank, meanwhile, basically maintained its projection of real GDP growth for fiscal 2011 by revising it to 1.9 percent from the earlier forecast 2.0 percent, as concerns over a slowdown in the U.S. and European economies are clouding the economic outlook.
As for the core consumer price index, which excludes volatile fresh food prices, the BOJ said it now expects a 0.4 percent fall from the previous year in fiscal 2010, compared with the 0.5 percent drop estimated in April.
It kept its projection of its fiscal 2011 consumer price unchanged at a 0.1 percent rise.
“Exports and production have been increasing mainly due to high growth in emerging economies and increased global demand for information technology-related goods,” the BOJ said, while also referring to the improving business sentiment.
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