The Bank of Japan (BoJ) downgraded its assessment on exports, consumer spending and production in its latest monthly report released on Wednesay, a day after it lowered its overall view on the economy.

“Growth in exports is expected to remain only modest for the time being due to the slowdown in overseas economies,” the central bank said in the August report.

On Tuesday, the BoJ said economic growth in Japan has been sluggish against a backdrop of high energy and materials prices and weaker growth in exports, downgrading the view in July that the nation’s economic growth was “slowing further.”

The change in its economic assessment came after the government effectively declared an end to the longest economic recovery in the post World War II period and the beginning of a recession, saying in the August economic report that “the economy was weakening recently”.

The Bank of Japan also left its overnight call rate target unchanged at 0.5 percent for the 21st straight meeting on Tuesday, as widely expected by the market.

In a detailed analysis of economic parameters for August, the central bank said the momentum of exports growth has “slowed,” compared to the view in July that exports are on a rising trend but growth is slowing down.

The bank also downgraded its view on private consumption, saying it has been “relatively weak mainly due to sluggish growth in income and an increase in the prices of petroleum products and food, compared to the previous assessment that private consumption growth was slowing.

Reflecting a slowdown in exports and weakness in private consumption, industrial production has turned “relatively weak” and that it is expected to remain weak for the time being, downgrading the view in July that it “was somewhat softening recently.”

The BoJ also warned of a slower rebound in the world’s second-largest economy, saying economic growth in Japan “will likely remain sluggish for the time being”.

Looking ahead, the BoJ said exports are likely to see only modest growth in line with a slowdown in overseas economies. It said domestic private demand is expected to remain sluggish due to weakness in income and falling corporate profits.

Nevertheless, the central bank said the economy will “return gradually onto a moderate growth path as commodity prices level out and overseas economies move out of their deceleration phase”.

The Boj also warned of accelerating inflation, driven by higher commodity prices.

The year-on-year rise in core consumer prices has accelerated to the 2 percent level and that it is expected to be somewhat higher over the coming months, it said.

Core CPI excludes fresh food but includes energy prices.

($1 = 1 yen)

source: http://www.afxnews.com

Related Content