MNI INSIGHT: BOJ Expects Stagnant Q1 GDP On Spending, Exports

Bank of Japan officials are concerned stagnant first quarter growth will carry into private spending in the second quarter and temper a rebound as curbs ease once the spread of the Omicron variant likely wanes, MNI understands.

Weaker export and industrial production performance on domestic pandemic curbs to stem Omicron and global supply-chain disruptions are expected to continue in the first quarter, see: MNI BRIEF: BOJ Sees Q1 Exports, Factory Output A Bit Weaker. Earlier growth forecasts from the IMF and government for the calendar and fiscal year were more upbeat.

Exports and industrial production were further hit by the additional restrictions, including some temporary halts to work at domestic factories not predicted by the BOJ in January, MNI understands.

As well, rising petrol and food prices are putting pressure on households, along with higher import costs, amid sluggish wage hikes. BOJ officials, and the government, are concerned that consumers will reduce their spending, unless wages rise sufficiently to ease higher consumer prices, MNI understands.

The growth issue was highlighted in the opinions from the BOJ's January policy meeting and several statements from policymakers recently, including Governor Haruhiko Kuroda, that support for easy policy continues to be appropriate.

Japan's economy posted the first growth in two quarters for the October-December period, benefitting from an earlier relaxing of pandemic curbs in October. But the government has moved to re-impose some curbs this year as Omicron spreads and the vaccination pace slows.