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LEAD: BOJ lowers assessment for 3 out of 9 regional economies.

TOKYO, Oct. 15 Kyodo

(EDS: UPDATED WITH RELEASE OF SAKURA REPORT, OTHER INFO)

The Bank of Japan lowered on Friday its assessments for three out of the nation's nine regional economies as effects of government incentives waned and overseas economies slowed, while some regions voiced increasing uncertainty about the outlook.

Prior to the release of a quarterly report on regional economies, Bank of Japan Governor Masaaki Shirakawa told a meeting of the central bank's branch managers that attention should be paid to downside risks to the Japanese economy as its pace of recovery slows amid the yen's strength and decelerating overseas economies.

''It has become more likely that the return of Japan's economy to a sustainable growth path with price stability will be delayed,'' Shirakawa said in remarks at the outset of the meeting.

In the Sakura Report, which is akin to the U.S. Federal Reserve's Beige Book, the central bank said the economies of Kanto-Koshinetsu, Tokai and Chugoku have reported that ''the pace of recovery or pickup had recently slowed'' since three months earlier.

It is the first time since April last year that economic assessment on regions was downgraded, according to a BOJ official.

The adverse impact of the termination of a government subsidy program for purchases of environmentally friendly cars in early September served as a key factor in the lowered assessments, the official added.

Tokai, where Toyota Motor Corp. is headquartered, said the economy ''has continued to pick up, but the pace of improvement seems to have recently slowed sharply.''

The BOJ, meanwhile, left unchanged its assessment for the remaining regions, namely Hokkaido, Tohoku, Hokuriku, Kinki, Shikoku and Kyushu-Okinawa.

As for the economic outlook, some regions referred to the ''heightened uncertainty'' amid the yen's rise and the slowdown in economies in the United States and such countries as China, the report showed.

The central bank holds a meeting with managers from its 32 branch offices every three months to take stock of the state of the regional economies in order to steer monetary policy.

In the previous report in July, the BOJ upgraded its economic assessment for eight of Japan's nine regions, with many seeing that capital investment and private consumption had stopped decreasing or started picking up amid brisk exports to emerging economies. It left unchanged its assessment for the remaining one region, which was Tokai.

But with the yen continuing to rise against the U.S. dollar, the BOJ eased its monetary grip further on Oct. 5 by effectively resuscitating its zero-interest-rate policy. It also decided to set up a program to buy long-term government bonds and other potentially risky assets to bolster liquidity.

The yen's strength adversely affects the earnings of Japanese exporters and is believed to be slowing the nation's export-driven economic recovery.

Referring to the BOJ's latest policy decision, Shirakawa told the branch managers, ''The bank will continue to carefully examine the outlook for economic activity and prices, and take policy actions in an appropriate manner as a central bank.''
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Publication:Japan Weekly Monitor
Geographic Code:9JAPA
Date:Oct 18, 2010
Words:500
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