BOJ raises economic assessment for all regions for 1st time in 3.5 yrs

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TOKYO, July 6 Kyodo -
The Bank of Japan on Monday raised its economic assessment for all of the
nation's nine regions, the first such across-the-board upgrading since January
2006, thanks to pickups in exports and production.
In its quarterly ''Sakura Report'' on regional economies, the central bank
said, ''The pace of economic deterioration was slower in all regions compared
with the previous assessments,'' but added that ''most regions, however,
emphasized that their economies continued to be in a severe situation.''
The nine regions are Hokkaido, Tohoku, Hokuriku, Kanto-Koshinetsu, Tokai,
Kinki, Chugoku, Shikoku and Kyushu-Okinawa. In the previous report in April,
assessments were downgraded for seven of the nine regions.
The central bank released the report after discussing economic situations with
managers from its 32 domestic branches.
Based on the regional assessments, the central bank said that the Japanese
economy as a whole has ''begun to stop worsening, but it still remains in a
severe situation,'' suggesting that Japan is picking up from its worst postwar
recession albeit at a slow pace.
The BOJ said exports and production are leveling out, especially in industries
related to vehicle and electronics parts manufacturing sectors, though they are
still at a low level. Public investments also increased, it said.
The BOJ, however, added that corporate capital spending is ''sharply falling''
on the back of a steep deterioration in earnings, and that consumer spending
''remains weak'' amid worsening income and employment situations.
''Japan's economic conditions, after deteriorating significantly, have begun to
stop worsening,'' BOJ Governor Masaaki Shirakawa said at the opening of the
branch managers' meeting, adding there are also signs of improvement in global
economic and financial situations.
But he added the BOJ must continue to watch the downside risks to the economy
and prices when steering policy.
Hideo Hayakawa, head of the BOJ's Osaka branch, said at a press conference,
''Exports and production made a slight rebound from around March and April
after falling at breakneck speed from last fall to this spring.''
He said the rebound is largely owing to progress in inventory adjustments,
demand recovery in China and Japan's economic stimulus measures. ''But since
the U.S. and European markets remain sluggish, it is still unknown how long the
recovery of final demand will continue.''
Hayakawa added that the Kinki economy centering on Osaka was also hit by the
outbreak of a new strain of influenza since the first cases of infections in
the country were discovered within the region in mid-May, with hotels,
sightseeing spots and restaurants being hurt the most.
Junichi Maeda, head of the BOJ's branch in Nagoya, Aichi Prefecture, the
heartland for Toyota Motor Corp., said the government's tax cuts on
environment-friendly cars helped boost sales of hybrid cars. ''But it does not
mean that (automakers') earnings improved a lot as demand for luxury cars with
a large margin of profit remains sluggish.''
At the day's meeting with branch managers, Shirakawa also said Japan's
financial system has become calmer, but added that businesses still face severe
financing conditions.
Financial institutions still need to be closely monitored considering their
losses in fiscal 2008 and the widening differences in their management power,
he said.
==Kyodo