The Bank of Japan on Tuesday left its overall assessment of the nation's moribund economy unchanged in its February economic report, but made slight upgrades its views on exports and inventory conditions.
"Japan's economy continues to deteriorate," but exports are decreasing at a slower pace and inventory adjustment is progressing, the central bank said in the monthly report on economic and financial developments.
In January, the BOJ reported that the economy was deteriorating broadly, exports were declining and inventories were still strongly excessive.
The latest report, which was the basis for the BOJ Policy Board's policy decisions last week, says the economy will continue to worsen but that "the pace is expected to moderate gradually with downward pressure from exports and inventories abating."
The policy-setting panel decided Friday to leave the central bank's ultraeasy monetary policy unchanged despite calls for further credit-easing and for steps to induce inflation.
The BOJ report says the synchronized inventory adjustment in information-technology goods worldwide is coming to an end, and that signs seem to indicate that the declines in exports and production in East Asian economies have stopped.
"Under these conditions, exports are expected to stop decreasing and to turn up toward the middle of this year."
With the ongoing progress in inventory adjustment, the decline in industrial production is also slowing, the report says.
Companies, however, are still continuing to cut personnel expenses because of the glut in capacity, it said.
"Hence, the severity of employment and income conditions of households is intensifying, with unemployment continuing to rise and winter bonuses showing marked decreases."
The report also says that corporate fixed investment is expected to drop in line with the fall in profits, while private consumption is likely to remain weak mainly due to worsening employment and income conditions.