BOJ raises economic assessment for Tohoku and Shikoku as tech demand remains strong

The Bank of Japan revised up its economic assessment for two of the country’s nine regions in a quarterly report released Thursday while leaving it unchanged for the rest.

The central bank compiled the report at the day’s meeting of managers of its regional branches, which was held at its headquarters in Tokyo. Demand related to artificial intelligence remained strong, including for semiconductor manufacturing equipment and electronic components. When it comes to production, the BOJ raised its economic assessment for seven of the nine regions, excluding Hokkaido and the Tokai region.

In the report, the BOJ said the economy in all nine regions has been “picking up moderately,” “recovering moderately,” or “on a moderate recovery trend” while noting that “some weakness has been seen in part.”

The central bank revised upward its economic assessment for the Tohoku region from the assessment that the economy “has been picking up” to the view that the economy “has been recovering moderately.” It also raised its economic view for Shikoku from an assessment that the economy “has been picking up moderately” to the view that the economy “has been picking up.”

In interviews with companies, an electrical equipment maker in Osaka said that AI-related demand has been increasing faster than expected and that robust demand is likely to continue for about the next three years.

Many branch chiefs reported that private consumption has generally remained resilient, supported by improvements in real income. A department store operator in Shizuoka Prefecture said that sales of high-priced goods, such as luxury watches and jewelry, remained strong. Against the backdrop of rising stock prices, there were also reports that sales to wealthy consumers showed no signs of weakening.

Meanwhile, a retailer in Nagoya said that bad weather, including typhoons and heavy rain, weighed on consumption.

Kenji Fujita, manager of the central bank’s branch in Osaka, said at a news conference that small and midsize companies have made relatively smooth progress in passing on higher costs in business-to-business transactions, but that the process is still only halfway along and uneven among businesses closer to consumers.

Regarding the impact of the BOJ’s interest rate hikes to date, an official at the central bank’s Research and Statistics Department said only some companies had indicated that they would put off capital investment, while many said they would make necessary investments, including in labor-saving measures.