All regions except for Hokkaido are showing clear signs that the economy is back on a recovery path, Bank of Japan branch managers said during their quarterly meeting at the central bank Thursday.
The recovery is being supported by a pickup in domestic demand and a falloff in information technology-related inventories.
In particular, the recovery in the Kinki region is more vigorous than in other areas. Improvements have been broad, ranging from personal spending, labor and salaries, to housing investment and production, according to the Regional Economic Report released after the branch managers' meeting.
Of the nine regions, six upgraded their assessments from July. The report says stronger personal consumption is tied to an uptick in salaries, while higher production of electronics follows a drop in IT-related inventories.
But the overall outlook is being overshadowed by a recent surge in energy prices, which are expected to have a heavier impact on the earnings of small companies.
"So far, companies have made efforts to minimize the impact (of high oil prices) on their earnings," Nobuo Inaba, chief of the BOJ's Osaka branch, told a news conference. "But they would have generated more profits if oil prices were lower."
The report follows the BOJ's "tankan" quarterly business survey released earlier this month. The tankan showed slightly brighter sentiment at large manufacturers, with optimism for strong exports dampened somewhat by worries over soaring oil prices.
