BOJ’s Kuroda warns of ongoing COVID pain in the economy

© Reuters. Bank of Japan Governor Haruhiko Kuroda speaks at a press conference in Tokyo

By Leika Kihara

TOKYO (Reuters) – Japan’s economy recovered but any recovery is likely to be modest due to continued caution over the coronavirus pandemic, Bank of Japan Governor Haruhiko Kuroda warned Thursday.

The world’s third largest economy is facing a resurgence of COVID-19 infections. Record cases have been reported in the western region of Osaka, prompting authorities to enforce targeted lockdown measures.

Kuroda said Japan’s economy is likely to improve thanks to a recovery in global demand and the boost from massive government budget spending.

“But the pace of recovery will be modest as the pandemic remains cautious,” he said in a speech to a quarterly meeting of the BOJ’s regional branch managers.

“Consumption of services will remain under pressure for the time being as COVID-19 infections have increased again since last fall,” he said.

Kuroda’s comments suggest that the central bank will offer a cautiously bullish outlook on the economy when it releases new quarterly growth forecasts at this month’s rate review.

Japan’s economy has emerged from last year’s slump caused by the pandemic due to support from exports. However, slow vaccine launches and the renewed spike in COVID-19 cases are dampening consumption prospects.

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