The Bank of Japan (BOJ) on Thursday downgraded its economic assessments on five of the country’s nine regions amid the lingering impact of COVID-19 as well as supply shortages of semiconductors and other components that have hit manufacturers.
In its quarterly Sakura report, the central bank maintained its views on the remaining four regions, including the Tokyo area. The Japanese economy remains in a “severe” situation despite its recovery trend, it said.
Some regions reported “a pause in signs of a pick-up due to the effects of the spread of the novel coronavirus during this summer and production cutbacks in some sectors,” the BOJ said.
Tohoku, Tokai, Kinki, Chugoku, Kyushu and Okinawa are the five regions that saw their assessments cut. The views on the remaining four — Hokkaido, Hokuriku, Kanto-Koshinetsu and Shikoku — were maintained.
The assessments came after a COVID-19 state of emergency that had covered 19 of the country’s 47 prefectures was lifted at the end of September.
“Economic activity, mainly in the face-to-face services sector, is expected to remain at a level lower than before the spread of the coronavirus for the time being,” BOJ Gov. Haruhiko Kuroda told a meeting of the bank’s branch managers held via a videoconferencing system.
But he also said economic activity is expected to recover with the impact of the virus gradually waning.
“If the effect of the COVID-19 crisis subsides, the positive mechanism of incomes being used for consumption will gain momentum and the economy will grow further,” he said.
In the BOJ’s tankan quarterly survey for September, the diffusion index for current business conditions rose for the fifth straight quarter at both large manufacturers and large nonmanufacturers. But the survey also showed that large manufacturers are cautious about their business conditions toward the end of the year, with companies in a wide range of sectors concerned about the fallout of reduced automobile production.
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