Wednesday, the Bank of Japan lowered its economic assessment saying that the growth will likely remain sluggish for the time being. The central bank expects the world`s second-largest economy to return to moderate growth after international commodity prices stabilize and other economies pick-up the growth momentum. The central bank noted that the economic growth has been sluggish against the backdrop of high energy and materials prices and weaker growth in exports.

In its monthly Report of Recent Economic and Financial Developments released a day after the central bank retained the overnight call rate unchanged at 0.50%, the apex bank said Japan`s export growth is expected to remain only modest for the time being as weakness in overseas economies is reducing demand.

In July, the central bank had said Japan`s economic growth is slowing further, mainly due to the effects of high energy and materials prices and added that the economy is expected to grow at a slower pace for the time being and gradually return onto a moderate growth path thereafter.

On Tuesday, at the conclusion of its two-day monetary policy meeting in Tokyo, the BoJ Board of Governors voted to leave the overnight call rate unchanged for the 21st consecutive meeting. After announcing the decision, the central bank governor Masaaki Shirakawa had said the economic recovery might be delayed as rising prices across the glob is reducing demand for Japanese exports.

In the second quarter of 2008, gross domestic product, or GDP, had decreased 0.6%, marking its first decline since the second quarter of 2007.

Further, the central bank said, as a result of an expected decrease in corporate profits and relatively weak real household income, growth in domestic private demand is likely to be sluggish for the time being. Public investment is also predicted to decelerate. Hence, production is expected to remain relatively weak.

On the price front, the central bank noted that domestic corporate goods prices are likely to continue increasing as rise in international commodity prices is still biting consumers. However, the BoJ said the pace of growth is likely to slow.

The year-on-year rate of increase in consumer prices is expected to be somewhat higher over the coming months but to moderate gradually thereafter, reflecting developments in prices of energy and food, the BoJ said.


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