Japan’s regional economies are on firmer ground amid robust overseas demand for electronics and increased domestic consumer spending, the Bank of Japan said Monday.
In its quarterly Sakura Report, the central bank upgraded its assessments for three of the country’s nine regions — Tohoku, Hokuriku and Kinki — adding to evidence that the country’s economy is strengthening, though inflation remains persistently low.
Demand from China and other parts of Asia for components used in devices such as smartphones, and the machinery used to make them, continued to boost business for manufacturers.
“Exports are on the rise as shipments of parts for new models of smartphones and for use in automotive electronics ramps up,” the report quoted an official from a component maker based in the Kinki region of western Japan as saying.
Consumer spending increased nationwide as wealthy households splurged on luxury items and tourism from Asia continued to boom, although spending among middle-income earners remained reserved, a BOJ official told a press briefing.
The BOJ kept unchanged its view on the Hokkaido, Kanto-Koshinetsu, Tokai, Chugoku, Shikoku and Kyushu-Okinawa regions.
The Sakura Report, named for its cherry blossom-colored cover, is released every three months following a meeting of the BOJ’s regional branch managers. It is the Japanese equivalent of the U.S. Federal Reserve’s Beige Book.
At the meeting, BOJ Gov. Haruhiko Kuroda said nationwide inflation is expected to pick up toward its 2 percent target as the economy continues to strengthen amid the central bank’s monetary easing measures.
Although Japan saw core consumer prices rise just 0.9 percent in November from a year earlier, inflation is expected to gain momentum toward 2 percent “amid the backdrop of improvement in the output gap and a rise in medium to long-term inflation expectations,” he said.
“Japan’s economy is expanding moderately, with an operating virtuous cycle from income to spending,” he said, adding that the BOJ will continue its extraordinary easing measures until the target can be maintained in a “stable manner.”
Despite recent signs that Japan’s economy is firming — including seven straight quarters of expansion through September and the tightest labor market in decades — consumers have thus far been slow to increase spending, making businesses wary of raising prices.
There have been some indications that the trend may change. Government data showed, in December, that 80 percent of households with at least two people believed prices would rise over the next year — up from 78.6 percent in November — giving some support to the BOJ’s outlook for inflation reaching the 2 percent goal by fiscal 2019.
The administration of Prime Minister Shinzo Abe has pushed for wage increases by offering tax incentives for companies that raise pay, in a bid to boost household spending.
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