Majority of Japan's regional economies recovering moderately or continuing to recover: BOJ

The Bank of Japan (BOJ) maintained its view that the majority of regional economies here are recovering moderately or are on a recovery trend although the central bank lowered its view for the Tohoku region in the nation's northeast in its quarterly regional economic report released Thursday.

The BOJ said in its latest report that eight out of nine regional economies, with the exception of Tohoku, "had been recovering moderately, or had continued to recover."

The bank added that on the domestic demand side, business fixed investment had been "on a moderate increasing trend" and that private consumption had been "resilient against the background of steady improvement in the employment and income situation."

The central bank did note, however, that "exports and production had been sluggish due mainly to the effects of the slowdown in emerging economies."

Regarding the Tohoku region, devastated by an earthquake-triggered tsunami five years ago, the bank said it had revised its assessment downward from its previous view in January, stating that production had "continued to be somewhat weak" compared to other regions.

The current view compares to the BOJ's previous assessment were production was seen as "affected" by external factors, rather than being weakened.

Earlier in the day BOJ Governor Haruhiko Kuroda said the nation's overall economy is on a moderate recovery trend, but noted the bank stood poised to take further monetary easing measures if deemed necessary.

Kuroda said there had been a slowdown in international demand for Japanese goods and that this had stifled exports and production, the mainstay of the world's third-largest economy, but continued with his upbeat view that the overall economy is improving.

"Japan's economy continues to recover moderately as a trend, although some weaknesses are seen in exports and output," Kuroda said during a quarterly meeting with regional branches of the bank.

Despite inflation remaining flat compared to a year earlier, as the BOJ's already delayed 2 percent target in two years looms ever-closer, and the bank plunging its interest rates into negative territory in January in an unprecedented move, coupled with data showing output, demand and consumption is charting a downward trajectory and the Cabinet Office saying the economy is in a recessionary phase, the BOJ chief said he expects the economy to expand moderately.

The Cabinet Office's leading economic indicator which predicts future economic activity, however, dropped 2.0 points from a month earlier to 99.8 in February, the government said Wednesday, marking the fourth straight month of decline and the lowest level in four years, when in December 2012 the index read 98.9 against the 2010 base of 100.

With the yen catapulting to a fresh 17-month high versus the U.S. dollar during trading hours Thursday, as investors offloaded the U.S. dollar and piled into the yen as a safe haven following the U.S. Federal Reserve's ongoing dovish stance on the future pace of its interest rate hikes, Kuroda said that Japan's financial system is "maintaining stability."

Meanwhile, warning of market instability and currency volatility, and in contrast to Kuroda's optimism, Japan's Chief Cabinet Secretary Yoshihide Suga warned Thursday that Japan would intervene into currency markets to rebalance what the government described today as "one-sided" currency moves.

And while conceding that consumer inflation is likely to "hover around zero" for the time being, the central bank chief said that it would "accelerate towards 2 percent," without providing specifics.

He went on to say that the bank would continue to maintain its QQE policies along with its negative interest rate for as long as necessary to achieve the bank's inflation target "in a stable manner," adding that additional steps would be taken, if needed, by increasing asset buying or further lowering the BOJ's interest rates. Endit