TOKYO (MNI) – The Bank of Japan on Wednesday slightly revised down
its growth outlook, saying the pace of improvement in the economy is
likely to slow temporarily.

“Japan’s economy is likely to recover at a moderate pace, although
the pace of improvement is likely to slow temporarily,” the BOJ said in
its monthly economic report for September.

In August, the BOJ simply said, “Japan’s economy is likely to
recover at a moderate pace.”

Today’s assessment is consistent with a statement issued after a
two-policy setting-meeting ended on Tuesday.

The BOJ on Tuesday said, “Exports and production have been
increasing, albeit at a slower pace,” indicating the central bank
expects the pace of economic recovery to lose some steam in the
October-December quarter.

But the BOJ maintained its standard outlook that Japan’s economy is
likely to recover in the coming months.

The BOJ board is closely watching whether the strong yen and weak
share prices will hurt business sentiment and delay investment plans,
which could lead to a downward revision to their baseline scenario. The
BOJ’s Tankan quarterly corporate survey is due out on Sept. 29.

“Exports are expected to continue increasing, albeit moderately
from the time being, reflecting continued improvement in overseas
economic conditions,” the BOJ said in the September report.

“Signs of picking up in business fixed investment are expected to
gradually become more evident as the improvement in corporate profits
continues. However, with firms’ persistent sense of excessive capital
stock, the pace of improvement in business fixed investment is likely to
remain moderate for the time being.”

The BOJ also noted, “Private consumption is expected to remain on a
recovery trend, despite a likely temporary weakening mainly due to the
ending of the boost from the extremely hot weather and the abolition of
subsidies for purchasing energy efficient cars.”

“Production is expected to continue to trend upward, although it is
likely to temporarily show weakness primarily in durable consumption
goods,” it said.

On the current economic climate, the BOJ left its core economic
assessment unchanged for the fourth consecutive month, repeating,
“Japan’s economy shows further signs of a moderate recovery.”

The BOJ also maintained its outlook for consumer prices, saying,
“The year-on-year pace of decline in consumer prices is expected to slow
as a trend as the aggregate supply and demand balance improves
gradually.”

The central bank also repeated, “The employment and income
situation has remained severe, but the degree of severity has eased
somewhat.”

tokyo@marketnews.com
** Market News International Tokyo Newsroom: 81-3-5403-4833 **

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