The Bank of Japan provides the brightest view in the Japanese region in eight years

Tokyo — The Bank of Japan gave its most optimistic view of the country’s regional economy on Wednesday as a sign of conviction that the recent resurgence of coronavirus infections would not undermine the country’s fragile recovery. ..

A bright rating raises the possibility that the Bank of Japan will revise its growth and price forecasts for the year starting in April with new forecasts scheduled for next week.

Haruhiko Kuroda, the governor of the Bank of Japan, said, “Although the severe situation continues due to the pandemic of the coronavirus, the Japanese economy is picking up as a trend.”

Kuroda also said consumer inflation is likely to accelerate gradually due to the expected increase in demand.

Reuters tankan polls showed manufacturers less positive about their business situation in January on Wednesday, although rising energy and raw material costs are emerging as a new risk to Japan’s recovery. I showed that.

The survey highlights the dilemma Japan faces as a country that relies heavily on fuel and food imports, making its economy vulnerable to the ongoing type of cost-push inflation.

Rising inflation is a welcome step for the Bank of Japan’s efforts to reach its 2% price target, but rising living costs are at risk of chilling consumption, discouraging corporate inflation and driving Japan to deflation. I have.

According to another study, service sector sentiment improved in December, but uncertainty about the effects of Omicron variants worsened the indicators for measuring outlook.

So far, the Bank of Japan has taken such risks significantly.

In its quarterly report on Japan’s regions, the central bank raised the economic valuation of all nine regions for the first time since October 2013.

The consumption assessment has also been revised for the first time in all nine regions since the Bank of Japan began issuing its report in 2005.

“All regions are recovering or showing signs of recovery, as the pandemic’s impact on service consumption has eased somewhat,” the Bank of Japan said.

In the third quarter of last year, the Japanese economy shrank due to supply constraints and curtailment of activity to curb production and consumption in pandemic factories.

Analysts expect growth to recover from October to December and this quarter as production and consumption recover, although the recent surge in Omicron infections has clouded the outlook.

The Bank of Japan is widely expected to maintain a very loose policy, but emphasizes rising inflationary pressures that could shift the risk balance of the price outlook.

However, as inflation is far from the BOJ’s 2% target, Kuroda may emphasize that central banks are ready to keep their monetary settings loose.

Wholesale prices in November rose to a record high of 9.0% year-on-year, but moderate wage growth and consumption kept core consumer inflation in November at a more modest 0.5%.

Reika Kihara and Daniel Roythink