BOJ offers bleakest view in 6 years on Japan's regional economies

[TOKYO] The Bank of Japan (BOJ) on Monday cut its assessment for three of the country's nine regions, the biggest number of downgrades in six years, suggesting that the hit to exports and factory output from slowing overseas demand was broadening.

BOJ governor Haruhiko Kuroda said the economy was expected to continue expanding moderately with robust domestic demand offsetting some of the weaknesses in exports.

"Core consumer inflation is expected to gradually accelerate towards 2 per cent as the output gap remains positive, and medium to long-term inflation expectations heighten," Mr Kuroda told a quarterly meeting of the BOJ's regional branch managers.

But the central bank warned that weakening global growth and simmering Sino-US trade tensions were taking a toll on some Japanese regions reliant on overseas demand.

"We have had to cut our assessments on exports and output for some regions because we're hearing more complaints about the impact of the global economic slowdown than three months ago," said a BOJ official briefing reports on the quarterly report.

The report cited several companies that put off investment in new equipment due to uncertainty over the global outlook.

"We decided to forgo a plan to build a new semi-conductor equipment plant as Sino-US trade frictions heighten uncertainty over the global economy," a machinery maker in Kumamoto, southern Japan, was quoted as saying.

The BOJ raised its assessment for one region, while it maintained its view for five regions.

Under a policy dubbed yield curve control, the BOJ guides short-term interest rates at minus 0.1 per cent and the 10-year government bond yield around zero per cent in an effort to achieve its 2 per cent inflation target.

REUTERS