TOKYO (AFX-ASIA) - The Bank of Japan cut its economic assessment for the fifth consecutive month, saying adjustments in economic activity are becoming more severe as production falls more clearly affect households.
Last month's assessment said only that production was beginning to have a spillover impact on the household sector. In addition, the bank said the Sept 11 attacks in the US have heightened uncertainty over future economic developments in Japan. "Adjustments in economic activity are becoming more severe, as the substantial decline in production has a negative influence on employment and income conditions," the assessment said. "In addition, the terrorist attacks in the U.S. have further heightened uncertainty in Japan's economy," it added. "Concern that another substantial decline in exports will exert downward pressure on the economy is growing."
The assessment said that "business fixed investment is ... decreasing noticeably", compared with last month's statement that capex was only starting to fall.
The bank also said there were increasing indicators of weaker private consumption -- although this on the whole remains flat -- compared with the previous estimate that there were some such indicators.
However, he overall assessment of the outlooks for capex and consumption were left unchanged, it added.
"The decrease in corporate profits, particularly in manufacturing, has become evident and household income weakens gradually," the bank said, compared with its previous judgement that household income was beginning to weaken.
"Domestic wholesale prices are also declining somewhat faster because the effects from high crude oil prices and the depreciation of the yen in the past have dissipated," it said.
Previously, the bank said the impact from oil prices and the weak yen were merely abating.
It will take considerable time for the production decline to end, though production of information-related goods will stop at some point, it added.