By Mayumi Otsuma Jan. 18 (Bloomberg) -- The Bank of Japan raised its economic assessment in four of the country’s nine regions as the nation recovers from its worst postwar recession. “The economy had picked up in all regions, although regional differences in the pace and extent of the recovery remained,” the central bank said at a quarterly meeting of its branch managers in Tokyo today. “Many regions continued to point to the low level of economic activity.” The report helps Bank of Japan policy makers assess developments in the economy ahead of a board meeting next week. Governor Masaaki Shirakawa told the regional chiefs that the bank will persist with its policy of keeping borrowing costs near zero to overcome deflation and sustain growth. “The Bank of Japan’s assessment so far is that the economy will stay on a moderate recovery track and it wants to watch how things will develop,” said Hideo Kumano, chief economist at Dai-Ichi Life Research Institute and a former BOJ official. The yen fell on speculation Japan will keep interest rates low for longer than other economies. The currency traded at 91.01 per dollar at 2:50 p.m. in Tokyo from 90.77 late Jan. 15 in New York. The central bank kept its view of the remaining five regions unchanged. All nine areas reported increases in industrial production as well as higher sales of cars and home appliances, thanks to government incentives to buy the products. ‘Severe’ Job Market Even so, seven regions said consumer spending as a whole remained weak. All nine locations reported a “severe” labor market and said capital spending was either falling or at low levels because corporate profits were deteriorating. Gross domestic product in Japan is forecast to expand 1.4 percent in 2010 after a projected 5.3 percent contraction last year, according to the median estimate of economists surveyed by Bloomberg News. Shirakawa said the central bank expects the pace of the recovery will remain moderate and exports and production will probably slow as global fiscal stimulus wanes. “Japan’s economy is picking up, although there isn’t yet sufficient momentum to support a self-sustaining recovery in domestic private demand,” he told the branch managers. Rising Unemployment Japan’s jobless rate unexpectedly rose to 5.2 percent in November, the first increase after it hit a record 5.7 percent in July, adding to signs that employment growth may not be strong enough to support the recovery. The unemployment rate was 6.3 percent in Aomori, northern Japan, and 7.3 percent in the southern island chain of Okinawa in the third quarter compared with Tokyo’s 5.2 percent, according to a government data. The job outlook is damping consumer spending in rural areas. Marui-Imai, a retailer based in Hokkaido, northern Japan, filed for bankruptcy protection last year and this week plans to close its Muroran City unit, the only department store in a town that used to flourish on the steel industry. Mitsukoshi Ltd., which is owned by Isetan Mitsukoshi Holdings Ltd., Japan’s largest department store chain, in May closed its branch in Kagoshima, southern Japan. Finance Minister Naoto Kan said today that the risk of a return to recession remains and the government will attempt to pass its record 92.3 trillion yen ($1 trillion) budget proposal as quickly as possible at a Diet session that convenes today. Kan, who took the position this month, has indicted he wants the central bank to do more to bolster prices and support the economy. Heads of the central bank’s Osaka, Nagoya, Sapporo and Fukuoka branches will brief reporters about their economies later today. Osaka is home to electronics companies including Panasonic Corp. and Sharp Corp., while Nagoya is the base for Toyota Motor Corp. To contact the reporter on this story: Mayumi Otsuma in Tokyo at motsuma@bloomberg.net

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