BOJ lowers assessments of all of Japan's 9 regional economies

TOKYO, Oct. 20 Kyodo - The Bank of Japan downgraded its economic assessments of all of the country's
nine regions Monday, citing a negative impact from high energy and raw material
costs as well as decreasing exports affected by slower growth in the global
economy.
BOJ Governor Masaaki Shirakawa said the Japanese economy is highly likely to
remain ''sluggish for the time being as it becomes clear that the world's
economy is slowing.''
He gave little indication about the bank's future monetary policy, reiterating
it will closely monitor upside risks to inflation and downside risks to growth.
Analysts say market participants are now awaiting the bank's semiannual outlook
report due out Oct. 31 for any hint as to a policy shift, including a possible
interest rate cut designed to boost the flagging economy.
The downgrading in the central bank's quarterly ''Sakura Report,'' which came
out during the meeting of BOJ branch managers, added to the view that the
country's economy had completely halted its longest post-war expansion phase
amid the deepening global financial turmoil.
The BOJ began releasing the report in April 2005, and this is the first time
the bank has cut the assessment on all of the regions at the same time.
Japan's ''economic growth had been sluggish in general, mainly due to the
effects of earlier increases in energy and materials prices and weaker growth
in exports, although there were some regional differences,'' the report said,
revising lower the overall evaluation.
The previous report, released in July, said growth of the economy ''continued
slowing recently.''
The latest report underlined that the country's economy has lost steam, with
individuals reluctant to spend their money under pressure from rising prices of
gasoline, food and other daily goods amid slow growth in their income. Slower
exports have led manufacturers to decelerate their production, it said.
The nine regions are Hokkaido, Tohoku, Hokuriku, Kanto-Koshinetsu, Tokai,
Kinki, Chugoku, Shikoku and Kyushu-Okinawa.
''Companies are increasingly taking a cautious position on the economy,''
Masahiro Samejima, head of the BOJ Osaka Branch, told reporters. ''Households
cut their spending...banks have become skeptical about extending fresh loans to
small and midsize companies.''
At the meeting of the bank's 32 branch managers earlier in the day, Shirakawa
said corporate and household demand in the Japanese economy could slow further
given the lingering effects of high oil and other commodity prices.
His warning followed the result of the bank's latest Tankan survey, released
earlier this month, which showed the business sentiment of large manufacturers,
a key component, had fallen to the lowest level in more than five years.
The BOJ chief also said an increasing number of bankruptcies has made credit
conditions tighter with smaller firms experiencing trouble raising fresh
capital.
There are more companies going under in the real estate and construction
industries, which are believed to be under the influence of the U.S. subprime
mortgage crisis. The BOJ is closely watching those developments and the
''increasing tendency of credit costs'' with more banks wary of extending fresh
loans, Shirakawa said.
==Kyodo