A strong yen and ambiguous global economic outlook enabled The Bank of Japan to downgrade its economic assessment of the country in October. This is the first time since January 2009, when the bank has downgraded the economic outlook.
The downgrade is attributed to the lower pace of economic recovery although the bank lowered the interest rates to near zero yesterday and further eased the regulations in order to boost the economy.
"Japan's economy still shows signs of a moderate recovery, but the pace of recovery is slowing down," the BOJ said in its monthly economic report on Wednesday.
The report also underlined the reduction in exports and production and noted that private consumption will most likely weaken, at least on a temporary basis. The report said the economic stimulus package and higher sales in retail have not contributed significantly to the economy; higher retail sales were attributed to hot weather in the report.
The BOJ expects the year-to-year declines in consumer prices to be moderate as the overall balance in supply and demand has improved. The bank noted that domestic corporate goods prices are not expected to see a surge in recent months as the appreciation of the yen will have its impact on the sales.
The BOJ launched a five trillion yen fund yesterday which will purchase financial assets, government bonds and commercial paper, among other things.
BOJ Gov. Masaaki Shirakawa blamed the poor economic conditions and other risks as the main reason behind the recent monetary eases.
