BOJ ups assessment for all nine regions

Bloomberg, Kyodo

The Bank of Japan on Monday raised its assessment of all regions for the first time since last July, citing a pickup in the global economy and resilient domestic demand, following its unprecedented easing measures.

The central bank became more upbeat about all nine regions, it said in its so-called quarterly Sakura Report.

The upgrades highlight new BOJ Gov. Haruhiko Kuroda’s confidence in the economy as household and company sentiment improve on a weakening yen and rising stocks and profits. The bank may raise its inflation outlook later this month, sources said last week.

In January, the BOJ cut its assessment for eight of the nine regional economies, the highest number of downgrades in nearly four years, in light of the global economic downturn and the protracted impact of the eurozone’s debt crisis.

Behind the upward revision in March was the fact that “domestic demand had been resilient, supported in part by improvement in household and business sentiment, and that overseas economies had gradually been heading toward a pickup,” said the report, released after a quarterly meeting of BOJ branch managers.

Speaking at the meeting Monday, Kuroda said the central bank’s new monetary easing steps are expected to “drastically change the expectations of markets and economic entities” about the country overcoming nearly 15 years of deflation.

Kuroda said that the BOJ aims to achieve its 2 percent inflation target as soon as possible, hopefully in around two years. It was his first meeting with BOJ branch managers since taking office March 20.

“The quantitative and qualitative monetary easing is expected to drastically change the expectations of markets and economic entities, in addition to spreading effects to longer-term interest rates and asset prices,” Kuroda said. “These moves will support positive developments that have started to appear in the real economy and financial markets” and help lift inflation expectations.

The steps under the new monetary easing program announced April 4 include additional purchases of government bonds and risky financial assets such as exchange-traded funds and real estate investment trusts, which have weakened the yen and lifted share prices.

On the economy, Kuroda said it has stopped weakening and “has shown some signs of picking up,” adding it is expected to return to a moderate recovery path in the future on the back of solid domestic demand and increasing growth in overseas economies.