TOKYO: The Bank of Japan downgraded its economic assessments for eight of the country’s nine regions in a quarterly report released Monday, citing a resurgence of COVID-19 cases and prolonged supply chain disruptions.

The central bank also cited growing concerns over the impact on corporate activities of soaring commodity prices and Russia’s invasion of Ukraine. Of the nine regions, the BOJ kept its view on the Chugoku western region unchanged.

By category, the BOJ cut its assessments on consumer spending for all nine regions for the first time since July 2020.

A recovery in demand for in-person services, including the use of restaurants and hotels, came to a halt due to the spread of the omicron coronavirus variant.

The BOJ also lowered its views on production for four regions, including the Tokai central and Tohoku northeastern regions, with shortages of semiconductors affecting the auto industry.

Japan’s economy is “on a track to recovery, although some weaknesses are seen,” BOJ Governor Haruhiko Kuroda said at a meeting of the central bank’s branch managers, where the quarterly report was adopted.

Kuroda said that the country’s economy “will continue to pick up while being affected by soaring commodity prices.”

The April report showed that many companies have started raising their product and service prices to pass on higher costs. It also noted that retailers and restaurant operators are struggling to do this because of concerns about the possible loss of customers.

The report also cited worries that the Ukraine crisis may affect corporate activities through disruption to supply chains and a decrease in orders.

“It’s difficult for small and midsize companies and nonmanufacturers to pass on (higher costs) to consumers,” Hirohide Koguchi, manager of the BOJ’s Osaka branch, told a press conference after the meeting. Commodity prices may remain elevated amid the Ukraine crisis, Koguchi said.

JIJI Press