BOJ keeps upbeat view on most regions of Japan

The Bank of Japan maintained its upbeat economic assessment for eight of Japan's nine regions in a quarterly report on Thursday, signalling that the country is on track to emerge from recession without additional monetary easing. In the report issued at a meeting of BOJ branch managers, all of the regions, including one that cut its assessment, said their economies are recovering with households spending more as the pain from a sales tax hike in April last year subsides.
"Department store sales during the holiday shopping season exceeded year-before levels. Overseas tourists are also buying huge amounts of goods," Hidehiko Sogano, head of the BOJ's branch in Hokkaido, northernmost Japan, told a news conference.
A weak yen and falling fuel costs also benefited companies in areas heavily reliant on exports to Asia, such as the Kinki western Japan region that is home to electronic giant Panasonic.
"Exports are very strong," said Atsushi Miyanoya, the BOJ's branch manager overseeing the region.
"Many electronics makers shifted production to Asia even for goods they sell in Japan. That may change if the dollar rises to around 120 yen and makes it unprofitable for them to continue producing mostly abroad," he said. The dollar stood around 118 yen on Thursday.
Japan's economy slipped into recession in the third quarter of last year as the April tax hike cooled consumption. Many analysts expect growth to rebound as the tax-hike pain subsides.
HIGHER GROWTH FORECAST?
The quarterly report comes ahead of next week's rate review, where the BOJ is likely to raise its economic growth forecast for the fiscal year that will begin April 1, but cut its consumer inflation projection due to slumping oil prices.
Any cut in its inflation forecasts will underline the challenges of achieving the BOJ's 2 percent target and keep it under pressure to ease monetary policy again.
Having eased policy in October last year, many BOJ officials hope to hold off on action next week. They argue that while the
rout in global oil prices will slow inflation short term, falling fuel costs are positive for the economy and will help push up prices in the long run, reflecting the recovery.
But the benefits of lower fuel costs have yet to spread to broader areas of Japan, according to the regional report.
"While some small firms said they are feeling the positive effect of oil price falls, others said the benefits haven't spread enough yet," the report said.