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 a quarterly report, the central bank downgraded its views on the Chugoku region in western Japan after taking into account the damage wrought by flash floods caused by torrential rain in July, as well as on Hokkaido, which was hit by a strong earthquake in September.
A firm in the automobile industry was quoted as saying that while its production facilities escaped unscathed from the magnitude 6.7 quake in the northernmost region, the ensuing island-wide blackout caused a dip in output that it was rushing to make up for.
Meanwhile, the BOJ left unchanged its assessment on the Kinki region, whose main airport was temporarily shut down by the powerful Typhoon Jebi, as well as its evaluations of the Tohoku, Hokuriku, Kanto-Koshinetsu, Tokai, 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 Governor Haruhiko Kuroda said the central bank will keep an eye on risks to the economy as it continues with aggressive monetary easing in order to raise 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,” he said.
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 from the current 8 percent to 10 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 ultra-low levels “for an extended period of time” as the country prepares for the tax increase.
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.