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Consumer Confidence Data Take Focus

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Inflation Data Under Scrutiny

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TOKYO (MNI)

A likely upward revision to IMF global growth forecast for next year is expected to feed into an upbeat view on economic recovery next year in the Bank of Japan's end October release of its medium-term Outlook report, MNI understands.

The IMF updated its World Economic Outlook in July and placed a 0.5 percentage point increase for next year while keeping 2021 at 6.0%. The Oct. 12 release of the WEO, one of two main IMF economic forecasts annually, is used by the BOJ in its own quarterly Outlook report forecasts due at the Oct. 27-28 policy meeting , see: MNI STATE OF PLAY: Evolving Risks, Data Vital For BOJ Oct Meet.

BOJ officials expect the IMF to revise down global economic growth forecast this year and increase it for 2022, which is used as a benchmark estimate for the BOJ on the prospects for exports and industrial production.

REVISIONS EXPECTED TO JULY ESTIMATES

Japan's economic growth forecast this fiscal year ending March 31 2022, could be revised down from the +3.8% estimated in July and inflation also will be revised down from July's +0.6% due to lower mobile phone charges as the BOJ didn't incorporate the impact into the forecast in July.

But the fiscal 2022 forecast cis expected to rise from July's +2.7% in fiscal 2022, thanks to the impact of government economic stimulus package and rebounding private consumption, including pent-up demand as Japan steps up its vaccine rollout and eases measures to curb the spread of the coronavirus.

The BOJ maintains that Japan's economy will recover on increasing external demand, lifting exports and industrial production. The latest BOJ Tankan survey showed a more upbeat outlook than expected for the economy.

NEAR-TERM HEADWINDS

However, near-term slowing exports and industrial production caused by supply-chain disruptions for automobile manufacturers and others, and weaker private consumption led by Delta variant are concerns. BOJ officials expect the supply restrictions to ease in the coming months with the economic rebound timetable moved to the first quarter from the fourth quarter.

If the government resumes the Go To Travel Campaign, which suspended in December due to the spread of infection, consumer price index would be under downward pressure. But the BOJ will not incorporate the impact on CPI into the forecast until the government officially decides to resume the campaign.

Japan is also slated to hold fresh polls for the lower house of the Diet, or parliament, at the end of October.