The Bank of Japan on Wednesday downgraded its economic assessments of three out of the country’s nine regions, citing slowing production due to weak demand from overseas economies.
In its quarterly Sakura report, the BOJ revised downward its outlook for Hokuriku and Tokai in central Japan as well as Chugoku in western Japan, whose economies are largely dependent on exports.
It is the first time the central bank has downgraded its views on three regions since April last year. The BOJ left unchanged its assessments of the remaining six regions — Hokkaido, Tohoku, Kanto-Koshinetsu, Kinki, Shikoku and Kyushu-Okinawa.
All nine regions reported that their economies had been “either expanding or recovering” as domestic demand “had continued on an uptrend,” according to the report.
However, the report also said “exports, production, and business sentiment had shown some weakness, mainly affected by the slowdown in overseas economies and natural disasters.”
“Orders from our business partners in Asian countries largely declined as they took a wait-and-see stance on their capital investment. We have yet to see any sign of recovery,” a machinery maker in the Hokuriku region was quoted as saying.
A company in the auto industry in the Chugoku region also said in the report that exports, especially to North America and Europe, have significantly declined amid slowing overseas economies.
A transportation equipment maker in the Tokai region cited damage from Typhoon Hagibis, which hit a wide area of Japan in October, causing flooding and disrupting transportation as well as production and shipments in central and eastern Japan.
“The typhoon caused serious damage to our factory and we failed to recover production and supply chains by the end of last year,” the Tokai maker said.
With the nation’s consumption tax raised to 10 percent from 8 percent on Oct. 1, a BOJ official said the increase “temporarily affected consumer spending” but its impact on the economy was limited.
An auto dealer in the Hokuriku region said sales of new vehicles slowed following the consumption tax hike, but orders are expected to grow this year for new popular models which were recently released.
The BOJ’s January Sakura report followed its quarterly Tankan survey for December that showed business sentiment at large manufacturers had worsened for a fourth straight quarter to a nearly seven-year low, reflecting a global economic slowdown.
The central bank has been facing an uphill battle to achieve its 2 percent inflation target.
At the meeting with regional branch managers on Wednesday, BOJ Governor Haruhiko Kuroda reiterated his commitment to taking additional easing measures to achieve the inflation goal if necessary.
The BOJ will hold a two-day policy meeting from Monday while it is widely expected to keep its ultraeasy monetary policy unchanged.
The Sakura report — named after its cherry blossom-colored cover — is the Japanese equivalent of the U.S. Federal Reserve’s Beige Book and is released every three months following a meeting of the BOJ’s regional branch managers.