TOKYO (Reuters) — The Bank of Japan kept its upbeat assessment for all of the country's nine regions, saying a moderate recovery was taking hold and bolstering views the economy is on track to meet the central bank's price target without more monetary stimulus.
But central bank governor, Haruhiko Kuroda, stressed his resolve to maintain the massive stimulus programme for as long as necessary to sustainably achieve its 2 percent inflation target, reassuring markets that an exit from the ultra-loose policy was still distant.
"The BOJ will examine upside and downside risks to the economy and prices, and adjust monetary policy as needed," he told a meeting of the BOJ's regional branch managers on Monday.
With Japan only halfway to meeting its price target, the BOJ is set to keep its stimulus plan intact well into next year in contrast to its U.S. and British counterparts, which are starting to telegraph plans for rate hikes.
Still, market expectations of additional monetary easing by the BOJ have diminished significantly on brightening prospects for the world's third-largest economy.
In a quarterly report released after the meeting, all nine regions stuck to their assessment that their economies continued to recover moderately despite the pain from an increase in the sales tax to 8 percent from 5 percent in April.
Of the nine regions, four raised their assessment on capital expenditure to say it was picking up or increasing further, suggesting that the positive effect of premier Shinzo Abe's package of stimulus programmes and growth strategies — dubbed "Abenomics — is working its way through the economy.
"Companies that saw revenues increase are using the money to boost capital expenditure," said Toru Umemori, head of the BOJ's branch in Nagoya of the Tokai central Japan region — home to auto giant Toyota Motor Corp
"More firms are ramping up spending and that trend is broadening," he told a news conference.
The nine regions maintained their view from three months ago that household spending was picking up or recovering moderately despite the impact of the tax hike.
"Consumer spending is likely to stay firm as a trend with the effect of the tax hike seen subsiding around the summer as wage and income conditions improve," the report said, adding that the resilience in consumption was encouraging more firms to raise prices of their goods and services.
The BOJ has keep monetary policy steady since deploying an intense burst of monetary stimulus in April last year, when it pledged to double base money via aggressive asset purchases to accelerate consumer inflation to 2 percent in roughly two years.
Kuroda has repeatedly stressed that Japan can ride out the tax hike as the positive mood generated by "Abenomics" encourage companies to boost wages and capital expenditure.
There are signs the outlook for exports, a soft spot in an otherwise solid recovery, is picking up with electronic makers receiving increased orders for smartphone parts, the BOJ's regional report said.
Underscoring the optimism, the BOJ's "tankan" survey showed last week that business sentiment was poised to improve in the current quarter to September and major firms planned to increase spending more than expected this year.
Nominal wages in May also rose at the fastest annual pace since 2012 while the jobless rate hit 3.5 percent, the lowest in more than 16 years and a level the BOJ considers as near full employment.
While the increase in jobs available is positive for households, there are initial signs a shrinking labour force in a rapidly ageing population may curb long-term economic growth.Some retailers — mainly mid-sized supermarket chains — are starting to worry that labour shortages may force them to hold off on opening new outlets, said Atsushi Miyanoya, head of the BOJ's branch in Osaka, western Japan.
"It's not something affecting companies now but some of them see this as a future risk," he told a news conference.
Rising crude oil prices are also emerging as a headache for some manufacturers, who say they do not favour a further weakening of the yen as it would inflate already high energy costs, said Umemori of the Nagoya branch.
The report will be among factors that the BOJ's board members will scrutinise at their policy-setting meeting next week, when they are set to keep monetary settings unchanged and conduct a quarterly review of their long-term growth forecasts.
EXCLUSIVE: @tomford is opening its first-ever beauty store. The boutique, which opens November 20 in London’s Covent Gardens, was designed with the over-the-top glam Ford is known for. Read the full story on WWD.com, link in bio. #wwdbeauty #wwdnews (📷: Simon Wagner) #TomFordBeauty
New York-based DJ @harleyvnewton threw a party to celebrate the holiday collection of her dress and pajama line @hvn at the Ladurée Beverly Hills. It Girls @katebosworth, @rashidajones and more joined in on the fun, which included cocktails, croque monsieur sandwiches and a photo booth. #wwdfashion (📷: Owen Kolasinski/BFA.com)
For the holidays, @Burberry partnered with 20-year-old artist @blondeymccoy on a series of three outdoor murals in downtown Manhattan. The murals are McCoy’s interpretation of a Christmas eve party, the idea of charity and the spirit of family. His third mural, pictured here, is the most personal. The image depicts McCoy’s grandparents and father in London’s Trafalgar Square in the Seventies. “My work often features lots of sentimental objects.” #wwdeye
For spring 2018, designers applied bold colors and cartoonish motifs on everything from sneakers and belts to key chains. See all the top men’s accessories trends on WWD.com. #wwdtrends (📷: George Chinsee; Prop Styling by @rnasti; Market Editor: @luiscampuzano)
The @dior-sponsored @guggenheim international gala pre-party has a history of drawing cool-girl musical acts to serenade the crowd –– and last night was no exception. @haimtheband performed songs both new and old, and lured a star-studded audience with the likes of Rebecca Hall, Kate Mara, Mamoudou Athie and more. #wwdeye (📷: @lexieblacklock)
In a partnership between the @metopera and the @englishnationalopera, “Marnie” was born. The opera, with costumes sponsored by @mrporterlive, is an adaptation of the 1961 thriller by Winston Graham. Arianne Phillips, who created the costumes, is no rookie: She’s styled Madonna for her tours and created costumes for a myriad of films in the past. Read WWD’s interview with Phillips, where she talks about her inspiration for the opera’s costumes on WWD.com #wwdfashion
@barneysnyc took a different approach to their holiday windows this year. Instead of Christmas decor, Barneys tapped @thehaasbrothers to tell a story of positivity, gratitude and inclusivity via heartwarming silliness and humor. “It’s about kids and it’s about coming together and being family and loving each other,” said Simon Haas. #wwdfashion (📷: @joshuascottphoto)
Beauty influencer @kandeejohnson makes her foray into hair care with a collaboration with @ogx_beauty — making it the first time that OGX has teamed up for a product creation. The collab includes shampoos and conditioners in three scents. At 39 and a mom, Johnson is a different profile than the emerging social media stars, but is considered one of the pioneers of the digital beauty influencer world. Read WWD’s interview with her on wwd.com, including the strangest beauty product she’s ever tried #wwdbeauty