The Bank of Japan maintained its upbeat economic assessment for all nine regions of the country Monday and its governor voiced confidence that inflation will head toward his 2 percent target, suggesting that monetary policy will remain stable for the time being.
In a quarterly report on regional conditions, the central bank said all areas were either recovering or expanding thanks to robust overseas demand, a tightening job market and improving private consumption.
In its quarterly Sakura Report, the central bank said the economy in the Kanto-Koshinetsu area, which includes Tokyo, has been “expanding moderately.” It said the same of the Kinki region, which includes Osaka, but added that the effects of a major earthquake last month have been observed in some industries.
The report, named after 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.
“Japan’s economy is expected to continue expanding moderately,” BOJ Gov. Haruhiko Kuroda said in a speech at the quarterly meeting of regional branch managers.
Kuroda also reiterated that the BOJ will maintain its ultraloose policy until inflation hits its 2 percent target.
The BOJ revised up its assessment on capital expenditure for three of the nine regions, saying many companies have ramped up plant and equipment spending to streamline operations as they struggle to hire employees in a tight job market.
“The overall view is that a positive mechanism remains in place in Japan’s economy,” a BOJ official said in a briefing on the report.
But some firms pointed to risks such as rising costs from labor shortages and the impact of escalating trade frictions between the United States and China, the official said.
The recent heavy rain in western Japan may have had an impact on plant operations and goods distribution, though the overall effect on the economy was still unknown, the official added.
Rescuers dug through mud and rubble Monday, racing to find survivors after torrential rains unleashed floods and landslides that killed more than 100 people, with dozens missing.
More than five years of heavy money printing have helped reflate Japan’s economy but failed to fire up inflation, which remains well below the BOJ’s ambitious target.
Under a yield curve control policy adopted in 2016, the BOJ currently pledges to guide short-term rates at minus 0.1 percent and the 10-year government bond yield at around zero percent.
The BOJ’s regional report is among factors the central bank will scrutinize at its next rate review on July 30-31.
The government forecast last week that the economy will grow faster than private-sector projections in fiscal 2019, with exports, consumption and capital spending expected to offset the hit from a planned sales tax hike next year.