KONTAN.CO.ID - TOKYO. The Bank of Japan cut its economic assessment for two of the country’s nine regions hit by natural disasters, and pointed to complaints by some firms over the potential fallout from escalating global trade frictions.

Several companies surveyed by the BOJ said they were worried that higher U.S. tariffs imposed on China could trigger an inflow of cheap Chinese goods to Japan, disrupt supply chains or hurt their profits, a quarterly report showed on Thursday.

“Some companies said they saw changes in Chinese demand,” a BOJ official told reporters. “Rather than the current impact, many firms voiced worries about the effect the trade tensions could have on their future businesses,” he said.

The United States and China have slapped tit-for-tat tariffs on hundreds of billions of dollars of each other’s goods over the past few months, drawing warnings from global policymakers over the potential hit to global growth.

Data earlier on Thursday showed Japan’s exports fell in September for the first time since 2016 as shipments to the United States and China declined, likely impeding third quarter economic growth and adding to concerns about the broadening impact of the escalating Sino-U.S. trade row.

In a quarterly report on regional economies, the BOJ cut its economic assessment on the quake-hit northernmost prefecture of Hokkaido and the Chugoku western region, which saw factory output disrupted by heavy rain in July.

It maintained its assessment for the remaining seven regions, adding that all regions - including those which had their assessment cut - saw their economies expand or recover.

It was the first time in just over two years the BOJ cut its assessment for two or more regions.

While the downgrades were due mostly to the damage from natural disasters, the BOJ’s report said some firms fretted about the uncertain outlook stemming from the trade frictions .

“Higher U.S. tariffs for auto parts we export from China are hurting our group’s margins,” a company in Hiroshima, western Japan, was quoted as saying.

“We’re not seeing declines in orders from China yet, but we’re worried about future potential falls,” an electric machinery maker in Osaka, western Japan, was quoted as saying.

But BOJ Governor Haruhiko Kuroda offered a slightly upbeat view on inflation than three months ago and maintained his view the world’s third-largest economy will sustain a recovery.

“Japan’s economy is expected to continue expanding moderately,” Kuroda said in a speech to a quarterly meeting of the central bank’s regional branch managers.

Consumer inflation was moving around 1 percent, Kuroda added, giving a more optimistic view on prices than three months ago when he said inflation was hovering around 0.5 to 1 percent.

The BOJ’s regional report is among factors the central bank will scrutinize at a rate review on Oct. 30-31, when it conducts a quarterly review of its growth and inflation forecasts.

Editor: Wahyu T.Rahmawati