"Japan's economy is under strong downward pressure, mainly on the production side, due to the effects of the earthquake disaster, " the central bank said in its monthly economic report for April.
The tone of the central bank's most recent assessment was far more negative than its previous evaluation which concluded that nation's economy "is emerging from the current deceleration phase".
The BOJ said Friday that the economy will probably stay under " downward pressure" for a prolonged period of time, but will regain traction and eventually return to a "moderate recovery path".
"The earthquake has sharply dampened production in some areas by damaging production facilities, disrupting the supply chain, and constraining electric power supply," the bank's monthly report said.
"Exports and domestic private demand have been affected accordingly. Japan's economy is likely to remain under strong downward pressure, mainly on the production side, for the time being, but is expected to return to a moderate recovery path -- as supply-side constraints are mitigated and production regains traction -- backed by an increase in exports reflecting the improvement in overseas economic conditions and by a rise in demand for restoring capital stock," said the BOJ.
The central bank did add however that production will likely return as supply-side problems are solved, but until then is expected to remain at a low level.
At the conclusion of a two-day policy meeting Thursday, the BOJ said it will maintain its key interest rate at an ultra-thin zero to 0.1 percent in a bid to boost the nation's flagging economy, which have been severely compounded by the devastating affects of the March disaster.
In addition, Japan's central bank announced that it will introduce a one trillion yen (11.71 billion U.S. dollars) emergency loan program to facilitate cheap loans to financial institutions in the regions affected by the disasters. For the latest updates PRESS CTR + D or visit Stock Market news Today
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