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The Bank of Japan said Thursday that the economy as a whole is expanding moderately thanks to high profitability in the corporate sector and strong domestic demand.
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19 October 2006
TOKYO (Dow Jones)--The Bank of Japan said Thursday that the economy as a whole is expanding moderately thanks to high profitability in the corporate sector and strong domestic demand. "The economy as a whole expanded moderately as all regions were on an expansion or recovery trend, although there were regional differences," the central bank said in its "Regional Economic Report" released Thursday.
Two out of 9 regions upgraded their individual economic assessments from the previous regional report in July.
The upward revision of the report is the first since April this year, an official at the BOJ said.
The report was published after the BOJ held its quarterly branch managers' meeting Thursday in Tokyo. It was the first quarterly report since the BOJ scrapped its zero-interest-rate policy in July.
BOJ Governor Toshihiko Fukui continued to hold an optimistic view on future economy.
"The Japanese economy continued expanding, and a long-lasting economic recovery will continue," Fukui said at the opening of the quarterly branch managers' meeting.
He said that the central bank continues to aim to achieve sustainable economic recovery with price stability by managing monetary policy appropriately based on developments of the economy and prices.
Meanwhile, Masahiro Samejima, the BOJ's Osaka branch manager, said the Kansai region of western Japan has seen limited impact from the slowdown of the U.S. economy.
"There hasn't been much effect on" the Kansai region, which centers on Osaka, Samejima said at a news conference after the branch managers' meeting.
Samejima also said the Kansai region - home to major electronics companies such as Matsushita Electric Industrial Co. and Sharp Corp. - doesn't have to worry much about any impact from information-technology-related inventory adjustments.
Samejima said private firms are still cautiously implementing their capital spending, although the financial environment remains accommodative due to very low interest rates.
"Private firms' capital spending are still in cash flows. We will continue to closely monitor development of capital spending in addition to land prices," he said.
Capital Spending Increasing In All Regions Of Japan
Many branch managers reported upbeat views on individual economic items, such as capital spending, production, personal spending, and labor and income conditions.
Capital spending continued to be on an increasing trend in all regions. Most regions of Japan also reported that fund demand by small- and medium-sized companies as a whole are recovering.
Smaller firms reported that impact from a rise in lending rates after the BOJ's decision of ending the zero-interest-rate policy in mid-July was limited.
Many companies said "the rise in the interest rate was mild, and the impact was limited", according to the BOJ report.
Following the BOJ's scrapping of its zero-rate policy in July, many banks raised their short-term prime lending rate - a benchmark lending loan for smaller firms - to 1.625% from 1.375%.
The rise in interest rates haven't affected their capital spending plans either. Still, the pace of fund-raising by smaller firms will be mild as private firms continued to make efforts to maintain healthiness of their financial conditions, it said.
The outcome from the meeting matched the latest monthly economic report released last week.
The BOJ said last week that the Japanese economy continued expanding moderately and a long-lasting economic expansion will continue.
The result from the branch managers' meeting generally will not affect monetary policy.
Fukui will deliver a brief speech at a general assembly meeting of the Community Bank Shinyo Kumiai Friday.
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