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MNI BoC Review: "Very Unusual" Indeed


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MNI (London)
By Hiroshi Inoue
     TOKYO (MNI) - The Bank of Japan held back on additional easing at last
week's policy meeting as insurance against the economy slowing further, leaving
some ammunition at hand in case momentum toward achieving its price stability
target is lost, MNI understands.
     How both business sentiment and investment intentions hold up in the
December Tankan survey will be closely eyed by the bank, with growing concerns
they may dip below historical averages.
     Few companies downgraded their capex plans in Q3 according to the September
Tankan survey, with BOJ staff noting revisions normally come in H2 and the
slowdown in global growth was set to hamper future investment plans.
     A major concern is that capex plans are revised significantly lower,
increasing the risk that the virtuous cycle stalls and the price momentum will
be lost.
     In the December 2018 survey, major manufacturers revised their capex plans
higher by 15.6%, down from +17.5% seen in that September's survey and broadly in
line with historical average revisions.
     This year, the September survey showed capital investment plans up 11.8%, a
rare downward revision from the June survey, with the BOJ pointing to technical
     Despite the weakness in manufacturing investment, capex plans to deal with
the increasing labor shortages and help boost efficiency levels across the
service sector are seen by the BOJ as a last bastion against the economy
deviating from the virtuous cycle.
     The BOJ expects the economy to contract in Q4, weighed by weaker exports
and industrial production, along with the post-tax hike drop in consumer
spending, but will eye carefully just how big a contraction there is and whether
it is temporary with a bounce back in Q1 or not.
     The big picture for both Q4 and an early look at Q1 will be seen in hard
data ahead of the GDP report due in mid-Feb
     The central bank sees exports remaining weak for now, but picking up some
time next year. However, should exports fall significantly, companies will lose
confidence, further weakening sentiment at both the corporate and consumer
--MNI London Bureau; tel: +44 203-586-2225; email:
--MNI Tokyo Bureau; tel: +81 90-2175-0040; email:
[TOPICS: MMJBJ$,M$A$$$,M$J$$$,MX$$$$]
MNI London Bureau | +44 203-865-3812 |
MNI London Bureau | +44 203-865-3812 |

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