TOKYO, Aug 10: Slowing overseas growth may delay a recovery in Japanese exports, with no clear signs of improvement in external demand, the Bank of Japan said on Friday, issuing its strongest warning to date over growing risks to the country’s economic recovery.
The assessment signals the BOJ’s heightened concern that its forecast of a moderate recovery, which serves as a basis for holding off on easing monetary policy for now, is becoming elusive.
Policymakers are hoping that exports will pick up before the boost from spending for rebuilding from last year’s earthquake peaks around year-end.
In a monthly economic report, the BOJ maintained its view that overseas growth will gradually pick up and support exports, but warned that there was high uncertainty over the outlook.
‘The overseas economic slowdown, if prolonged, may delay a recovery in exports,’ it said.
‘The environment surrounding exports hasn’t shown clear signs of improvement. It may take some more time for exports to clearly recover,’ it said.
That was a bleaker view than last month, when it said exports were showing signs of picking up.
Factory output is also weakening and is likely to improve only slightly for the time being, the August report said, warning that companies remain cautious about boosting production with external demand yet to rebound.
The BOJ kept monetary policy steady at its policy-setting meeting on Thursday, standing pat for the fourth straight month after having expanded stimulus in February and April.
The central bank has stressed that it will act again only if risks to the outlook heighten enough to derail the recovery.
But many BOJ officials are becoming less convinced of the strength of the economy as companies feel the pinch from the slowdowns in China and Europe.
Weak trade data from China, South Korea and Taiwan in the last few weeks have cast doubt on the chances of the global economy regaining traction in the third quarter.
Japanese manufacturing activity declined in July at the fastest pace since last year’s earthquake, while June exports marked the first annual drop in four months and factory output unexpectedly dipped.
The BOJ releases its assessment of the overall economy on the day of its policy decision. It publishes a more thorough analysis of each components of the economy in a monthly economic report, usually released the following day. (AGENCIES)
Trending Now
E-Paper
Follow our WhatsApp channel