BOJ's Kuroda warns of lingering pandemic pain for economy

TOKYO: Japan's economy was picking up but any recovery was likely to be modest due to lingering caution over the coronavirus pandemic, Bank of Japan Governor Haruhiko Kuroda warned on Thursday.

The central bank offered a bleaker assessment than three months ago for two of Japan's nine regions and maintained its view on the remaining areas, signalling cautious optimism on the outlook for the fragile recovery.

The world's third-largest economy is seeing a resurgence in COVID-19 infections, with record cases reported in the western region of Osaka, which has prompted authorities to enforce targeted lockdown measures.

Kuroda said Japan's economy was likely to improve thanks to a rebound in global demand and the boost from the government's massive fiscal spending.

"But the pace of the recovery will be modest as caution over the pandemic remains," he said in a speech to a quarterly meeting of the BOJ's regional branch managers. "Services consumption will remain under pressure for the time being due to a resurgence in COVID-19 infections since last autumn," he said.

In a quarterly report on regional economies, the BOJ revised down its view for two areas largely due to continued weakness in service consumption.

While the assessment for the remaining areas was unchanged, the report highlighted a growing divergence between exporters benefitting from booming global demand, and retailers suffering from the hit to consumption from the pandemic.

"The US auto market is recovering rapidly. Smartphones are also doing well, so we're seeing an increase in orders for elecronic parts," an electronics maker in Kyoto, western Japan, was quoted as saying in the report.

A restaunt operator in Nagoya, central Japan, complained that customers weren't returning much due to caution over the pandemic, according to the report.

The report will be among factors the BOJ will scrutinise when it issues fresh quarterly growth projections at this month's rate review.

Japan's economy has emerged from last year's slump caused by the pandemic on support from exports. But slow vaccine rollouts and the renewed surge in COVID-19 cases cloud the outlook for consumption.