The Bank of Japan on Thursday upgraded its assessments of four of the country's nine regional economies as activity continued to pick up with no antivirus curbs in place, but higher inflation is casting a pall over the outlook for consumption.
In its quarterly report, the BOJ said many regional economies are either "picking up" or "picking up moderately," helped by the easing of supply constraints and revived activity despite the novel coronavirus pandemic.
Kanto-Koshinetsu, which includes Tokyo, and the Kinki region centering on Osaka were among the upgraded areas.
Assessments were maintained for the five other regions in the Sakura report, among the materials to be consulted when the Japanese central bank holds a two-day policy meeting next week.
The removal of antivirus curbs has helped the services sector that was lagging behind manufacturing in recovering from the COVID-19 fallout. Inflation in Japan has quickened at the fastest pace in decades, but private consumption has so far been supported by pent-up demand, economists say.
Still, company officials in the survey acknowledged that consumers have become increasingly budget-minded due to price hikes in recent months amid higher raw material costs amplified by the yen's sharp depreciation, especially against the U.S. dollar.
