April 13, 2015 / 9:16 AM / 4 years ago

UPDATE 2-BOJ sees economy improving region by region, keeps upbeat view

* BOJ raises view of 3 regions, keeps intact other regions

* All regions recovering or recovering moderately-BOJ

* Some BOJ officials see Japan firms shifting production home

* Region home to Toyota may see economy head for “expansion” (Adds branch managers’ comments)

By Leika Kihara

TOKYO, April 13 (Reuters) - The Bank of Japan raised its assessment for three of Japan’s nine regions, the most in more than a year, and maintained its rosy view for the remaining areas, signalling that the benefits of its stimulus programme was broadening.

A weak yen boosted exports and lured more overseas tourists, whose strong appetite for goods ranging from consumer electronics to cosmetics are reviving regional areas long left out from the recovery, the BOJ’s quarterly report on regional Japan showed on Monday.

“In the past, companies used to think only about cutting prices to boost sales. Now, they are thinking more about deploying high-quality, expensive goods,” Toru Umemori, the BOJ’s branch manager overseeing the Tokai central Japan region, told reporters.

The optimism underscores the dominant view in the BOJ that the world’s third-largest economy can hit the bank’s ambitious 2 percent inflation target without additional stimulus.

“All regions said their economies are either recovering or recovering moderately,” the BOJ said in the report, issued at a quarterly meeting of the bank’s regional branch managers.

It raised the assessment for three regions, the most since January 2014, including for the Tokai area - home to auto giant Toyota Motor Corp.

The assessment for the region that its economy “continues to recover steadily,” was the most optimistic view made for any area in eight years.

“Void of overseas shocks, the economy will continue to recover steadily or even head for an expansion,” Umemori said.


Japan is emerging from recession as exports rebound. But private consumption has been disappointingly weak, casting doubt on the strength of the recovery and keeping alive expectations the BOJ may expand stimulus again this year.

Core machinery orders fell for a second straight month in February, data showed on Monday, a sign business investment may remain lacklustre in coming months.

Some BOJ branch managers, however, saw increasing signs that the weak yen and rising labour costs in China are prompting big manufacturers and parts suppliers to shift production home.

“Most companies are using existing excess capacity to increase domestic production. But there are some, albeit a small number, that are building new plants,” Atsushi Miyanoya, the BOJ’s Osaka branch manager, told a news conference.

The report will be among factors the BOJ will scrutinise in issuing new economic and price forecasts on April 30. Some analysts say the bank may ease at the meeting if it cuts its bullish inflation forecast for the year to March 2016. (Editing by Simon Cameron-Moore)

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