By Mayumi Otsuma
July 7 (Bloomberg) -- The Bank of Japan said the economy has worsened in eight of the country's nine regions since April as costlier energy and raw materials slowed the expansion.
``Growth of the economy as a whole continued slowing recently, mainly due to the effects of high energy and material prices, although there were some regional differences,'' the central bank said in a quarterly report in Tokyo today.
The central bank lowered its assessment of consumption in all nine areas as soaring gasoline and food prices left people with less money to spend. Governor Masaaki Shirakawa said earlier today that the bank expects growth in the world's second-largest economy to keep slowing.
``Governor Shirakawa probably wants to know how inflationary expectations of consumers and businesses in the regions are developing, and how companies are setting prices,'' said Hideo Kumano, chief economist at Dai-Ichi Life Research Institute and a former Bank of Japan official. ``The bank wants to get first-hand voices from branches nationwide.''
Shirakawa reiterated that the central bank has no bias regarding the direction of its next policy move.
``The Bank of Japan is committed to implementing monetary policy flexibly by closely checking upside and downside risk factors,'' he told the branch managers. ``Economic growth will probably keep decelerating for the time being, but return to a moderate expansionary path thereafter.''
Shelved Policy
The central bank in April shelved a policy of gradually raising interest rates. Economists predict Shirakawa and his colleagues will keep the benchmark rate at 0.5 percent this year.
Tohoku in northern Japan was the only region that didn't have its economic assessment cut, the central bank said.
Household spending's ``sluggishness became increasingly apparent, although it remained generally firm,'' the report said. In April the bank described consumption as ``generally firm.''
Sentiment among Japan's households, whose outlays accounts for more than half of the economy, is at a six-year low as they struggle with the steepest inflation in a decade. Core consumer prices, which exclude fresh food, rose 1.5 percent in May from a year earlier, the fastest pace since 1998.
The central bank said corporate profits are declining because of the increase in oil and raw materials costs, and business investment is slowing in ``many regions.'' Export growth is cooling and industrial output is flat, it said.
Shirakawa said global inflation is accelerating, financial markets remain volatile and the U.S. economic outlook is ``uncertain.''
Tankan Survey
The central bank's Tankan business survey last week showed confidence among large Japanese manufacturers reached the lowest since September 2003 and big companies expect earnings to fall for the first time in seven years.
In April, the policy board forecast growth of 1.5 percent for the year ending March 2009, and said core consumer prices will climb 1.1 percent. The bank will review those projections at next week's policy meeting, which ends on July 15.
``Economic growth has been undershooting the bank's April outlook, while prices have been overshooting,'' said Mari Iwashita, chief market economist at Daiwa Securities SMBC in Tokyo. ``It's too early to say whether Japan will slip into a recession or not.''
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