BOJ says Japan exports, output to continue rising

TOKYO: Japanese exports and output will continue to rise albeit at a slower pace than before, the Bank of Japan said in a monthly economic report on Thursday, but it warned that the strong yen and uncertainty over overseas growth cloud the outlook.

Industrial production is expected to clearly turn positive in the July-September quarter as summer power shortages did not do much harm and companies mostly restored supply chains hit by the March earthquake and tsunami, it said.

While growth may slow somewhat after July-September, output will continue to rise in the fourth quarter as automakers plan further increases in production.

But the central bank warned that output of electronic parts may weaken as the sector faces strong inventory adjustment.

"There are various uncertainties such as developments in overseas demand and the strong yen," the BOJ report said on the outlook for output.

Solid overseas demand will continue to help exports grow although the pace of growth will moderate and the impact of recent yen rises warranted attention, the central bank said.

It also said capital spending was picking up and will likely continue to increase, helped in part as companies restore plants and equipment damaged by the March earthquake.

The BOJ kept its policy settings unchanged on Wednesday and stuck to its view that Japan's economy was on course for a moderate recovery.

The central bank announces its assessment of the economy on the day of the rate review. It releases a monthly report the following day with more details on each component of the economy.

Copyright Reuters, 2011