Bank of Japan downgrades assessment of economy for March, stresses risks

Fri, Mar 7 2008, 06:36 GMT
http://www.afxnews.com

TOKYO (Thomson Financial) - The Bank of Japan (BoJ) has lowered its assessment of the economy in its March report, released Friday, saying the pace of global growth is slowing as higher prices for energy and materials are beginning to weigh on corporate profits.

"Japan's economy is expanding moderately as a trend, although the pace of growth has been slowing, mainly due to the drop in housing investment and the effects of high energy and material prices," the latest monthly report says.

In February the BoJ's opinion was that the economy was expanding moderately as a trend, although the pace of growth seemed to be slowing, mainly because of a drop in housing investment.

By adding another worrying factor and changing the wording of its assessment slightly, the central bank is stressing the downside risks to the economy.

The latest report warns of the emerging adverse impact of higher prices for energy and materials on corporate profits.

"Corporate profits have remained high, although they are leveling off," the BoJ said.

The latest quarterly survey by the Ministry of Finance shows that the combined pretax profit of non-financial companies fell for the second straight quarter in the fourth quarter of last year.

Earlier today, the central bank's policy board voted unanimously to maintain the overnight call rate target at 0.5 percent, as widely expected by the market.

The board meets next on April 8-9.