MNI BRIEF: State of Emergency To Weigh On Demand, Warns BOJ

Bank of Japan officials have warned that Tokyo's fourth state of emergency will weigh on pent-up demand for face-to-face services, putting temporary downward pressure on consumer spending, MNI understands.

Bank officials see it is unlikely that the spread of vaccinations will quickly release strong pent-up demand, but there are hopes the vaccinations will gradually increase consumer spending on travel and eating out.

Reservations for hotels and flights during or after the summer are increasing, according to local newspapers.

But bank officials heard no evidence in meetings with businesses that older people who have been inoculated with the vaccine twice have increased their spending.

The state of emergency will further discourage older people, who remain cautious about going out amid concerns over the more infectious Delta variant, bank officials warn.

The fourth state of emergency was beyond the expectations of BOJ officials, but within the view that the economy remains susceptible to the impact of Covid-19.

BOJ officials see no need to change the view that the impact of Covid-19 will wane gradually, and then almost subside in the middle of the projection period to fiscal 2023.

Japan's government has declared a state of emergency for the Tokyo area through to Aug. 22 amid a new wave of infections.