The Japanese central bank said on Wednesday the country's economy which is mired in recession has stabilised and recovery will begin in the latter half of fiscal 2009.
Presenting an encouraging picture of the export-oriented economy, the Bank of Japan [ Images ] noted that financial conditions are showing signs of improvement.
"Japan's economic conditions have stopped worsening. Public investment is increasing and exports and production are picking up.
". . .financial conditions, while remaining generally tight, have continued to show signs of improvement," the central bank said in its statement on the nation's monetary policy.
The apex bank noted that the economy would start recovering from the 'latter half of fiscal 2009' mainly on account of measures taken by the government to stabilse the financial system.
It added that improvement in overseas economies and conditions in global financial markets would help in the country's economic recovery.
Meanwhile, the apex bank has left the benchmark rate unchanged at 0.1 per cent.
Hit by the financial turmoil, Japanese economy declined at a staggering pace of 14.2 per cent on an annual basis in the January-March period. The central bank said that business sentiment, especially of large manufacturing firms, has stopped deteriorating.
Going by the bank's projections, the country's real GDP is expected to contract in the range of 3 to 3.8 per cent in the fiscal 2009.
The Japanese economy is forecast to witness a growth of 0.5 to 1.5 per cent in fiscal year 2010.
However, the apex bank said that there are continued high downside risks to the economy stemming from future developments in the global financial conditions and domestic financial situation, among others.
"Regarding the outlook for prices, there is a possibility that inflation will decline more than expected, if the downside risks to the economy materialise or medium to long-term inflation expectations decline," the statement said.
The latest outlook from the Bank of Japan could signal that the worst economic crisis might be over for the Asian region. On Tuesday, Singapore said that its economy would shrink less in 2009 and there has been improvement in the second quarter ended June.
According to Singapore's ministry of trade and industry, the country's GDP is expected to shrink in the range of 4 to 6 per cent in 2009.
Earlier, the Singaporean economy was projected to contract as much as 6 to 9 per cent.