MNI BRIEF: BOJ To Point To Growing Downside Risks

The Bank of Japan will point to bigger downside risks at its March 17-18 meeting as rising commodity prices and worsening of terms of trade weigh on activity, MNI understands.

While the BOJ is unlikely to take immediate policy action, and still expects major indicators to recover, private consumption is considerably weaker than predicted in January as Omicron hit confidence in Japan more than elsewhere, even if slowing exports and industrial production are largely as expected.

Higher food and energy prices caused by more expensive crude will squeeze household spending and hit confidence, after a fall in consumption since mid-January more than wiped out its October-December rebound. A rise in wages in a tight labour market should only partially compensate for inflation.

The BOJ will undertake a quarterly review of the medium-term economic growth and inflation outlooks at its Apr. 27-28 meeting. In January, it based its inflation forecast on crude at around USD80 per a barrel versus around USD110 today.