Bank of Japan says economy improving - Cites improvements with exports and production

Bank of Japan says economy improving - Cites improvements with exports and production
By Justine Lau in Hong Kong and Mure Dickie in Tokyo
Copyright The Financial Times Limited 2009
Published: June 16 2009 07:44 | Last updated: June 16 2009 12:06
http://www.ft.com/cms/s/0/7ab11538-5a38-11de-8c14-00144feabdc0.html


The Bank of Japan on Tuesday upgraded its outlook for the world’s second-largest economy, buttressing hopes that the worst of its recession since the second world war may be over.

The central bank, which left its benchmark interest rate untouched at 0.1 per cent, acknowledged that domestic private demand continued to decline, but noted that exports and production were improving and that public investment had increased.

”Japan’s economic conditions, after deteriorating significantly, have begun to stop worsening,” the BoJ said following a meeting of its policy board. ”In the coming months, Japan’s economy is likely to show clearer evidence of levelling out over time.”

The BoJ’s comments marked the second consecutive month in which it has offered a more upbeat assessment of the economy’s outlook. In May, when it issued its first upgraded prognosis in nearly three years, the central bank said ”deterioration in economic conditions [was]... likely to moderate gradually.”

While the BoJ remains too cautious to assert that the economy has bottomed out, economists are increasingly confident that gross domestic product will return to growth in the current quarter.

News of the upgrade failed to lift the Tokyo markets, however, with the Nikkei 225 losing 2.9 per cent to close below the 10,000 mark.

Last week, Japan said corporate bankruptcies fell in May year-on-year, the first such decline in a year. In April, both exports and industrial output reported sequential growth for the second consecutive month. Exports rose a seasonally adjusted 1.9 per cent compared with March while factory output bounced back 5.2 per cent compared with the previous month.

Other indicators have been less positive, including signs of looming deflation and government data showing that seasonally adjusted unemployment hit 5 per cent, its highest level for half a decade.