MNI INSIGHT: BOJ Eyes Industrial Lag And Consumption Rebound

The Bank of Japan will likely maintain an overall view the economy will rebound as a trend as private consumption recovers with pandemic curbs lifted and phased tourism re-starts in June but is cautious on continued chip shortages restricting auto production, MNI understands.

April data on industrial production pointed to weakness for the month and a fresh fall in automobile output, raising some concerns the BOJ could tweak language the economy is "recovering as a trend” at the June 16-17 policy-setting meeting. But a survey by the Ministry of Trade And Industry (METI) of manufacturers, METI projected industrial production would rise 4.8% on month in May and 8.9% in June.

Also on the upbeat side, retail sales rose 2.9% y/y in April, data on Tuesday showed, with an upgrade to signs of recovery from flattening.

KEY DATA

Industrial output is a key piece of data for BOJ economists as it reflects both external and domestic demand, and look at policy settings, (See MNI INTERVIEW: Ex-BOJ Economist Defends Easy Policy, Yield Cap).

Bank officials are paying great attention to whether weaker manufacturing, mainly automobiles, can recover and drive capital investment and profits as key parts supplier China moves to lift some lockdown restriction in Shanghai in June.

The world's top carmaker, Toyota Motor on Friday lowered its global production forecast for June by about 50,000 vehicles on parts shortages that stem in part from the lingering effects of lockdowns in Shanghai.