The Bank of Japan maintained its upbeat assessment for all nine of the country’s regional economies and stressed that the pain from China’s slowdown was limited for now, suggesting that it saw no immediate need to expand monetary stimulus further, according to Reuters.
But four regions, including western and central areas home to big Japanese auto and electronics goods exporters, offered a gloomier view on output than three months ago, underscoring the fragile nature of Japan’s recovery.
“The market shock driven by China and the ensuing volatility have had a very big impact on companies,” Atsushi Miyanoya, head of the BOJ’s branch overseeing the Kinki western Japan region, told reporters on Monday.
But he stressed that the slowdown in China, which suffered the weakest growth since 2009 in July-September, has yet to hit exporters in western Japan that much, pointing to a pick-up in shipments of smart-phone parts and car batteries.
The Tokai central Japan region, home to auto giant Toyota Motor Corp, also saw weak exports to China offset by brisk shipments to the United States.
“The impact from China’s slowdown has been relatively mild,” said Toru Umemori, the BOJ’s branch manager overseeing the Tokai region.
In a quarterly report issued on Monday, the BOJ maintained its view that Japan’s regional economies were recovering, with strength in capital expenditure and consumption offsetting weakness in external demand.
Retailers in regional Japan were also helped by Chinese tourists who, undeterred by China’s market rout in August, continued to flock to Japanese shops for goods ranging from cosmetics to diapers, several BOJ branch managers said.
Japan’s economy contracted in April-June and some analysts expect it to have shrunk again in July-September as China’s slowdown and rising grocery costs hurt exports and consumption.
The government cut its assessment of the economy last week, warning that some parts of the recovery have dwindled due to weak overseas demand.
Such weak signs in the economy have kept alive market expectations that the BOJ may expand its already massive stimulus program at its rate review next week.
BOJ Governor Haruhiko Kuroda sounded unfazed, and maintained his optimism on the prospects for achieving his ambitious 2% inflation target.
“Japan’s economy is expected to continue recovering moderately,” he told the branch managers’ meeting, signaling that the economy can weather the pain from soft external demand without additional monetary easing.
