(Reuters) - The Bank of Japan is likely to upgrade its view of output and the economy this month, encouraged by progress in restoring supply chains and expected improvement in business sentiment in months ahead, sources said.
But the central bank will strike a note of caution about signs of a global economic slowdown, including those for emerging nations when it reviews policy later this month, sources familiar with the BOJ's thinking said.
The rise in May factory output and manufacturers' upbeat production forecasts for June and July, have reinforced views within the BOJ that supply constraints will recede by September and become less of a concern for the economy.
The central bank also sees its June tankan survey, published on Friday, as evidence that the economic damage from the devastating March 11 earthquake was temporary, with many firms forecasting an improvement in business prospects and planning increases in capital expenditure.
The BOJ will therefore consider changing the language of its economic assessment compared with last month, when it said the economy appeared to be picking up but remained under downward pressure mainly on output.
"Supply constraints are certainly easing. The focus for Japan's economy will shift from supply constraints to strength in demand both overseas and at home," said one source who spoke on condition of anonymity.
But some in the BOJ are more worried than before about signs of slowdown in the global economy which, if prolonged, would hurt exports just when Japan is emerging from supply constraints later this year.
The BOJ will therefore probably repeat its warning of lingering downside risks to the global economy.
The central bank is expected to hold off on easing monetary policy at its rate review on July 11-12 unless the Greek debt crisis triggers financial market turmoil severe enough to threaten Japan's outlook for a moderate recovery.
Source: www.reuters.com
But the central bank will strike a note of caution about signs of a global economic slowdown, including those for emerging nations when it reviews policy later this month, sources familiar with the BOJ's thinking said.
The rise in May factory output and manufacturers' upbeat production forecasts for June and July, have reinforced views within the BOJ that supply constraints will recede by September and become less of a concern for the economy.
The central bank also sees its June tankan survey, published on Friday, as evidence that the economic damage from the devastating March 11 earthquake was temporary, with many firms forecasting an improvement in business prospects and planning increases in capital expenditure.
The BOJ will therefore consider changing the language of its economic assessment compared with last month, when it said the economy appeared to be picking up but remained under downward pressure mainly on output.
"Supply constraints are certainly easing. The focus for Japan's economy will shift from supply constraints to strength in demand both overseas and at home," said one source who spoke on condition of anonymity.
But some in the BOJ are more worried than before about signs of slowdown in the global economy which, if prolonged, would hurt exports just when Japan is emerging from supply constraints later this year.
The BOJ will therefore probably repeat its warning of lingering downside risks to the global economy.
The central bank is expected to hold off on easing monetary policy at its rate review on July 11-12 unless the Greek debt crisis triggers financial market turmoil severe enough to threaten Japan's outlook for a moderate recovery.
Source: www.reuters.com
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