MNI BRIEF: Exports Offset Higher Commodity Prices For Now: BOJ

The Bank of Japan said the impact of the rise in international commodity prices will be offset by higher exports, the full text of the Outlook Report released on Monday showed.

"The impact of the increase in exports essentially is likely to outweigh that of trading losses, and thus, on a net basis, the rise in international commodity prices will likely have positive effects on Japan's economy overall," the BOJ said.

"Japan's economy has started to experience trading losses due to rising international commodity prices. It should be noted, however, that the rise in international commodity prices in the current phase has been brought about mainly by the recovery in economies accounting for a large share of Japan's exports, such as the United States, China, and the NIEs," the report said.

The BOJ, however, warned, "It is possible for commodity prices to surge beyond supply and demand fundamentals, mainly due to excessive expectations of market participants."

"Additional rises in commodity prices in such a situation could, similar to a supply shock, have a stronger negative impact on Japan's economy due to the associated deterioration in the terms of trade," the report said.