BOJ: Positive signs seen as business picks up all over Japan

Business conditions picked up from three months ago in all nine regions of Japan, according to a Regional Economic Report released July 5 by the Bank of Japan, marking the first time in 33 months that the central bank recognized improvement in all regions.

The report showed that businesses are taking a more positive approach to capital investment amid rebuilding efforts from last year's Great East Japan Earthquake, the "cash-for-clunkers" subsidies and other policy incentives, and a recovery in private spending, including a surge in recreational traveling.

Traveling stood out as a major driver of private consumption. Consumers refrained from taking long trips in the aftermath of the March 11 disaster, but they are returning to the custom, and the trend is especially marked among baby-boomers, with many now in retirement age.

"The number of foreign tourists has regained levels before the collapse of (U.S. investment bank) Lehman Brothers (in autumn 2008)," said Masatatsu Ozeki, general manager of the BOJ's Fukuoka Branch. "The March 2011 opening of operations along all segments of the Kyushu Shinkansen bullet train line is also having a robust impact."

Some businesses are making capital investments to take advantage of the brisk upswing in consumer spending. Some department stores in Yokohama, Nagoya, Osaka and elsewhere are making all-out face-lifting efforts or are reinforcing their lineup of tenants, officials said.

Some enterprises are also resuming updating their machinery, which had been put on hold while orders remained weak following the failure of Lehman Brothers.

In the Tohoku region, demand related to post-quake reconstruction, including public work projects, continues to boost business conditions. Such demand in the Tohoku region is also having positive impacts on surrounding areas.

"Demand related to reconstruction is boosting the output of cement and metal products," said Kyosuke Takada, general manager of the Sapporo Branch in Hokkaido.

Auto sales are also brisk. The Tokai region, home to many auto plants, had the label "recovering" in a BOJ business assessment report for the first time since the collapse of Lehman Brothers.

However, governmental subsidies for purchases of eco-friendly passenger cars, a major driver of auto sales, are expected to run out between late July and early August.

"There may be a backlash when the boosting effect of the subsidies is gone," said Shigeki Kushida, general manager of the Nagoya Branch in the Tokai region.