The Bank of Japan offered its most optimistic view of the country’s regional economies in nearly a decade, even as some firms warned that uncertainty over US President Donald Trump’s trade policies could affect their capital expenditure plans.
BOJ Governor Haruhiko Kuroda reiterated the central bank’s resolve to maintain its massive monetary stimulus, with inflation still distant from his ambitious two per cent target.
“Japan’s economy continues to recover moderately as a trend,” Kuroda said at a quarterly meeting of the central bank’s regional branch managers yesterday.
In a report issued after the meeting, the BOJ maintained its rosy economic assessment for eight of Japan’s nine regions, compared with three months ago, and revised up the assessment for one area.
Two regions, including the Tokai area home to auto giant Toyota Motor Corp., said their economies were “expanding moderately” – the first time in nine years the BOJ used such upbeat language for more than one region.
Many Japanese manufacturers were benefiting from strong overseas demand for electronic parts and semiconductor-making equipment, the report said, a sign Japan’s economic recovery continues to rely heavily on exports.
Two regions offered a rosier view on private consumption than three months ago, as a tightening job market and brighter earnings prospects prompting some companies to raise wages, the report said.
“Consumer spending picked up since the end of last year, a trend that’s being sustained thanks to a rebound in stock prices and receding worries about a strong yen,” Shinichi Uchida, head of the BOJ’s Nagoya branch in central Japan, told reporters.
Some firms complained that uncertainty over the new US administration’s trade policies could affect business plans, though few said they already planned to curb domestic spending, said a BOJ official who briefed reporters on the survey.
“We postponed a plan to boost capacity at our plant in Mexico due to uncertainty over the new US administration’s policies. But we don’t plan to change our investment in Japan,” a maker of metal products in eastern Japan said in the report.
Japan’s economy is showing signs of life as a rebound in global demand lifts its exports and factory output, though slow wage growth continues to weigh on private consumption.
Trump has threatened to change trade rules to make them more favourable for American jobs, undermining some Japanese exporters’ confidence in their manufacturing plans and likely sales in the US.
“There is growing concern among companies that [Trump’s policies] could affect exports and overseas production,” said Kimihiro Eto, the BOJ’s Osaka branch manager who oversees the western Japan region - home to electronics giants such as Panasonic Corp.
Some analysts say Trump may attack the BOJ’s ultra-loose monetary policy, characterising it as an attempt to keep the yen weak and give Japan’s exports an unfair advantage.
The BOJ has argued its massive stimulus is aimed solely at beating deflation and does not directly target exchange rates.
After three years of heavy money printing failed to accelerate inflation, the BOJ revamped its policy framework in September to one better suited for a long-term battle against deflation.