BOZ regional Japan looks gloomy as Reuters supply limit hits auto

© Reuters File Photo: Bank of Japan Governor Haruhiko Kuroda speaks at a news conference on January 21, 2020 in Tokyo, Japan. Reuters / Kim Kyung-hun / File photo

By Leica Kihar

TOKYO (Reuters) – The Bank of Japan (BOJ) on Thursday delivered its depressing outlook on the regional economy for more than a year as supply constraints disrupted factory and other product production, clouding the outlook for an export-dependent economy.

In a quarterly report, the central bank lowered its economic assessment for five of the country’s nine regions – the largest number of cuts since July last year – disrupting production and signaling danger of suffering from a coronavirus epidemic.

The BOJ’s growth forecast for Asia’s second-largest economy in the current fiscal year could be cautious, as it issues new quarterly estimates at its October 27-28 policy meeting.

In the wake of widespread damage from global chip and equipment shortages, BOJ has downgraded its outlook on output in four regions, including Tokai Central Japan – the home of the auto giant. Toyota Motor (NYSE 🙂 Corporation

“Southeast Asian factories are restarting but not fully operational, so (supply constraints) will take time to ease,” Shinichiro Hayashi, head of BOJ’s branch overseeing the Tokai region, told a briefing.

Although demand for IT products and equipment remains strong, such supply constraints bind the outlook for exports, which was the main driver of Japan’s fragile recovery.

BOJ Governor Haruhiko Kuroda maintained his optimistic outlook on the economy, saying it was likely to recover if the epidemic began to subside.

Analysts expect costs to rise again from October due to the lifting of emergency bans, a sharp decline in new infections and advances in vaccination.

The recent rise in fuel prices has put pressure on manufacturers, although it will help accelerate consumer inflation towards the BOJ’s 2% target.

“Basic consumer inflation is hovering around 0% but we expect it to reflect somewhat positively on rising fuel prices,” Kuroda said in a speech to branch managers.

“Consumer inflation will gradually accelerate as the economy continues to improve and the impact of mobile phone fee charges diminishes,” he said.

Japan’s main consumer price halted a 12-month decline in August, as fuel consumption affected mobile phone fees as well as weaker costs for the coronavirus epidemic.

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