The Bank of Japan turned cautious about the country's economic outlook but said the world's second-largest economy should continue recovering despite slower exports and vowed to give full support by injecting ample cash.
'Japan's economy continues to recover as a whole although the increase in exports and production seems to be coming to a pause,' the central bank said in a report for November whose wording was slightly less upbeat than a month ago.
'Japan's economy is expected to continue to recover,' it added. However, it dropped the words 'gathering stronger momentum' seen in the October report.
Earlier this week the Japanese government downgraded its view on the economy, the first such downward revision since June 2003, saying in its monthly report that the pace of the recovery was slowing.
The Bank of Japan made no comment on the forex markets other than to note simply that the yen has appreciated against the dollar recently. The dollar hit record lows against the euro and 7-month lows against the yen today on increasing concern over the massive US current account and budget deficits.
The central bank noted in its report today that corporate spending is increasing, although at a slower pace, while company profits are improving.
'The employment situation has been on an improving trend and household income has stopped declining,' the Bank of Japan said, adding this has led to steady consumer spending.
Private consumption has emerged as the main support for the economy as exports, a driving force behind the current upturn, have slowed. Japan's economy grew only 0.1% in the July-September quarter from the second quarter for an annualised gain of 0.3%, well short of analyst forecasts for 0.5% and 2.1%.
Earlier, the bank's policy board voted unanimously to leave its ultra-easy monetary policy unchanged, as widely expected, in a bid to support the economy.
