BOJ keeps rosy view of regional Japan

[TOKYO] The Bank of Japan on Monday maintained its upbeat assessment on regional sectors of the economy, saying they are recovering thanks to a pick-up in output and tightening job markets.

In a quarterly review of regional economies, the BOJ raised its assessment for the Hokkaido northernmost region and left intact the views for the remaining eight areas. "All regions saw their economies recover or recover moderately" reflecting gradual improvements in domestic and external demand, the BOJ said in the report.

The optimism came despite soft exports and output reflecting feeble overseas demand, which led some analysts to believe the world's third-largest economy may have suffered a temporary soft patch in the April-June quarter. "Japan's economy will continue to recover moderately," BOJ Governor Haruhiko Kuroda said in a speech to a quarterly meeting of the bank's regional branch managers.

While stressing that Japan's banking system remains stable, Mr Kuroda said the BOJ is carefully watching market developments in the wake of Greece's referendum that voted against European bailout terms.

The Greek referendum has heightened the chance of the country's exit from the euro, adding to uncertainty over the global outlook and casting doubt on the BOJ's rosy view that exports will rebound and underpin a steady recovery.

The Kinki western Japan region, home to electronic giants like Panasonic Corp, saw exports continue to rise but output of machinery and automobiles weaken as inventory piled up.

The regional report will be among factors the BOJ will scrutinise when it conducts a quarterly review of its economic and price forecasts at the next policy meeting on July 14-15.

Many analysts expect the BOJ to hold off on expanding monetary stimulus at this month's meeting, preferring to wait for more clues on whether economic growth will accelerate enough to nudge inflation closer to its 2 per cent target.

The central bank has stood pat on monetary policy since expanding stimulus in October last year to prevent slumping oil prices, and a subsequent slowdown in inflation, from delaying a sustained end to nearly two decades of deflation.

REUTERS