Japan's regional economies expanding, downside risks await

Source: Xinhua| 2019-01-10 21:41:11|Editor: xuxin
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TOKYO, Jan. 10 (Xinhua) -- The Bank of Japan (BOJ) said on Thursday that all regional economies across the country had been expanding or recovering from a string of natural disasters that struck the nation last summer on the back of steady income and spending growth, and an uptick in overseas exports.

But economists here have pointed out that Japan is facing significant headwinds related to its "ticking time bomb" demographic crisis and a consumption tax hike, which threaten to further contribute to the nation's colossal public debt load and continued deflationary pressure.

In the central bank's quarterly "Sakura Report" released Thursday, the BOJ highlighted that both Japan's northern Hokkaido and southwestern Chugoku regions had upwardly revised their assessments, following a downward revision in the wake of a powerful earthquake in September which rocked the north, and heavy rain which pummeled the southwest in July.

"According to assessments from regions across Japan, all nine regions reported that their economy had been either expanding or recovering," the BOJ said.

"Compared with the previous assessment in October 2018, the Hokkaido and Chugoku regions, which had revised down their assessments due to the effects of the natural disasters -- namely, the 2018 Hokkaido Eastern Iburi Earthquake and the heavy rain in July 2018 -- revised up their assessments, taking into account the progress in restoration and reconstruction," the report stated.

The assessments for the other seven regions of Tohoku, Hokuriku, Kanto-Koshinetsu, Tokai, Kinki, Shikoku and Kyushu-Okinawa were unchanged, the central bank said.

Noting that the impact of overseas economies, including issues of trade tensions, had been limited so far, the BOJ said that some companies nevertheless are "pointing to some effects, such as a decline in orders."

Overall, however, the central bank maintained that the "the virtuous cycle from income to spending had been maintained" owing to exports increasing, with overseas economies "continuing to grow firmly on the whole."

The quarterly report is released following a meeting of regional BOJ branch managers, and at the latest meeting, BOJ Governor Haruhiko Kuroda said that on the back of increasing wages and spending, the economy is expected to continue expanding moderately.

Economists have been quick to point out, however, that the central bank's lofty inflation target of 2 percent still remains some way off and corporate and household consumption could see a significant decline when Japan's consumption tax hike to 10 percent comes into effect in October.

Japan's economy plunged into recession when the government raised the tax to 8 percent from 5 percent in 2014, experts highlighted, noting that despite various iterations of the government's "Abenomics" brand of economic policies, Japan has a public debt amounting to more than 236.6 percent of its gross domestic product (GDP), the worst in the industrialized world.

The amount is expected to swell, experts have said, with social welfare costs likely to rise exponentially as Japan's population continues to simultaneously age and shrink, as the number of senior citizens increase and the birthrate declines.