January 10, 2019 / 12:37 AM / 5 months ago

BOJ stays upbeat on Japan's regions, warns trade war pain spreading

TOKYO (Reuters) - The Bank of Japan on Thursday maintained its upbeat view on regional economies of the country but warned that more companies were complaining of the fallout from simmering U.S.-Chinese trade frictions than three months ago.

FILE PHOTO: Bank of Japan governor Haruhiko Kuroda attends a seminar at the International Monetary Fund - World Bank Group Annual Meeting 2018 in Nusa Dua, Bali, Indonesia October 13, 2018. REUTERS/Johannes P. Christo

In a quarterly report scrutinizing regional Japanese economies, the central bank raised its assessment for two areas and kept its view unchanged for the remaining seven regions.

“All regions were seeing their economies expand or recover” as exports increase as a trend and private consumption rises moderately, the BOJ said in the report issued after a meeting of its regional branch managers.

“But an increasing number of firms were pointing to some effects, such as declining orders, from uncertainties regarding overseas economies including the U.S.-Chinese trade friction,” the report said.

In a speech to the branch managers, BOJ Governor Haruhiko Kuroda reiterated the central bank’s resolve to maintain a massive stimulus program to accelerate inflation to its 2 percent target.

“Japan’s economy is expanding moderately” as rising household income underpins consumption, Kuroda said, making no mention of heightening overseas uncertainties.

The report will be among factors the BOJ’s nine-member board will scrutinize when it meets for a rate review on Jan. 22-23.

Japan’s economy shrank in the third quarter last year and some analysts warn any rebound in October-December quarter could have been weaker than initially expected, as trade protectionism and slowing global demand hurt business sentiment.

Fears of a global economic slowdown and growing signs the U.S. Federal Reserve will pause in its interest rate hike cycle have boosted investors’ demand for the safe-haven yen, leading to an unwelcome rise in the Japanese currency that could hurt its export-reliant economy.

Under a policy dubbed yield curve control, the BOJ guides short-term interest rates at minus 0.1 percent and the 10-year government bond yield around zero percent to achieve its 2 percent inflation target.

Reporting by Leika Kihara; Editing by Chris Gallagher

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