The Bank of Japan on Monday downgraded its assessments of eight of the nation’s nine regional economies for the first time in nearly four years, amid a slowdown in the global economy.
All the regions except Tohoku, which was hit by the catastrophic 2011 earthquake and tsunami, said their recoveries had stalled or the pace had been moderate, the central bank said in a quarterly report released after its one-day meeting of branch managers.
It is the first time since January 2009, after the bankruptcy of Lehman Brothers Holdings Inc. the previous September touched off a global credit crunch, that the BOJ has downgraded the eight regional economies, according to the BOJ.
Before the release of the quarterly report, BOJ Gov. Masaaki Shirakawa told the regional mangers that the course of the global economy remains uncertain amid Europe’s debt problem and the pace of the U.S. recovery.
Speaking at the outset of the meeting, he also said the BOJ is promoting “powerful monetary easing” to strengthen the basis for economic growth, given that the year-on-year change in Japan’s core consumer price index is basically nonexistent and is likely to stay that way for a while.
“The central bank will proceed with monetary easing continuously by steadily increasing the amount outstanding in the asset purchase program” and continue to conduct monetary policy appropriately, he said.
Shirakawa’s remarks came amid speculation the BOJ could take more monetary easing steps at its Policy Board meeting next week due to persistent deflation.
All nine regional economies downgraded private consumption figures, affected partly by the end of the government’s subsidy program for the purchase of “eco-friendly” vehicles, while demand for flat-panel TVs remained sluggish, a BOJ official said.
The eight economies also revised downward their production activity due to the effects of the overseas slowdowns.
While many regions saw travel demand rise, some pointed to the decline in tourists from China resulting from the Senkaku dispute.
The BOJ left its assessment of the Tohoku economy unchanged, saying it is still supported by a substantial growth in public investment driven by reconstruction demand following the 2011 disasters.
In his speech earlier in the day, Shirakawa stressed the need to pay “full attention” to how the European debt crisis will affect the Japanese economy through financial and capital markets.
“There remains a high degree of uncertainty about the global economy, including the prospects for the European debt problem, the momentum toward recovery for the U.S. economy, and the likelihood of emerging and commodity-exporting economies simultaneously achieving price stability and economic growth,” he said.
As for the economy at present, Shirakawa said exports and industrial output have been relatively weak, affected by a slowdown overseas, while domestic demand is still being buoyed by reconstruction-related demand.