Extracts from the Statement on Monetary Policy
Overseas economies remain in a deceleration phase. In global financial markets, while investors' risk aversion on the back of the European debt problem has abated somewhat, particular attention should be given to developments in these markets. Japan's economy has been weakening somewhat. Exports and industrial production have decreased mainly due to the aforementioned development in overseaseconomies. Business fixed investment has shown some weakness in manufacturing mainly due to the effects of the deceleration in overseas economies, while it has been on a moderate increasing trend.
In private consumption, car sales have recently fallen back due to
the ending of some measures to stimulate demand for automobiles, while it has remained resilient.Meanwhile, public investment has continued to increase, and housing investment has generally been picking up. Financial conditions in Japan are accommodative. On the price front, the year-on-year rate of change in the CPI (all items less fresh food) is around 0 percent.
With regard to the outlook, Japan's economy is expected to remain relatively weak for the time being, and thereafter, it will return to a moderate recovery path as domestic demand remains resilient on the whole and overseas economies gradually emerge from the deceleration phase. The year-on-year rate of change in the CPI is expected to remain at around 0 percent for the time being.
Regarding risks, there remains a high degree of uncertainty concerning Japan's economy, including the prospects for the European debt problem, the momentum toward recovery for the U.S. economy, the possibility of emerging and commodity-exporting economies making a smooth transition to the sustainable growth path, and the spreading effects of the recent bilateral relationship between Japan and China. Furthermore, attention should continue to be paid to the effects of financial and foreign exchange market developments on economic activity and prices.