Business / Economy

BOJ downgrades views of two regional economies on natural disasters

Kyodo

The Bank of Japan on Thursday downgraded its assessments on two of the country’s nine regional economies, reflecting the negative impact of a recent string of natural disasters.

In its quarterly report, the central bank downgraded its views on the Chugoku region after taking into account the damage wrought by torrential rain in July, which caused flash floods in the area, as well as on Hokkaido, which was hit by a strong earthquake in September.

A firm there operating in the automobile industry was quoted as saying that while its production facilities escaped unscathed from the magnitude 6.7 quake, the ensuing island-wide blackout caused a dip in output that has left it rushing to catch up.

Meanwhile, it left its assessments unchanged on the Kinki region, whose main airport was temporarily shut down by powerful Typhoon Jebi, as well as the evaluations of the Tohoku, Hokuriku, Kanto-Koshinetsu, Tokai, Kinki, Shikoku and Kyushu-Okinawa regions.

Many firms also voiced concerns over heightened trade tensions between the United States and China, which have raised fears that tit-for-tat tariffs between the two could disrupt global supply chains.

The Sakura 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.

At the meeting earlier in the day, BOJ Gov. Haruhiko Kuroda said the central bank will keep an eye on risks to the economy as it continues with aggressive monetary easing aimed at raising inflation to its 2 percent target.

“We will continue to make the necessary policy adjustments to maintain momentum toward our price stability target … while inspecting the relevant risks.”

Kuroda’s comments came after Prime Minister Shinzo Abe said earlier this week the government will go ahead with a planned hike in the consumption tax to 10 percent from the current 8 percent in October 2019, a move that could hurt the world’s third-largest economy by making households and firms less willing to spend.

The BOJ’s policy-setting board in July pledged to keep interest rates at their current ultralow levels “for an extended period of time” as the country prepares for the tax increase, while reiterating its commitment to raising the inflation rate to 2 percent.

The board also tweaked its stimulus program to address concerns that the BOJ’s massive purchases of government bonds were distorting the market, saying it will allow long-term yields to move within a broader range from its zero percent benchmark.