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Free AccessMNI INSIGHT: BOJ Q2 Jobs Risk Worry As Corporate Profits Fall
--BOJ Sees Growing Risk That Hours, Wages Will Fall In Coming Months
--Concern Japan Could See Cut Back On Part-Time Worker Numbers
By Hiroshi Inoue
TOKYO (MNI) - The Bank of Japan will look through the Q1 downturn that has
pushed the country back into recession, as the data is already seen as
historical, with the expected slump in Q2 now the major concern for
policymakers, in particular the adverse impact it will have on the labour
market.
Economists at the Bank expect the economy to have slowed sharply in the
April-June period as the spreading Covid-19 pandemic and states of emergency
across Japan have weighed heavily of consumer demand and business sentiment.
The main concern now at the BOJ is that the ongoing slowdown will start to
hit the labour market, which in turn will further undermine both sentiment and
consumption, with services, particularly consumer-facing industries in the
hospitality and amusement sector, hit hard in Q2 by social distancing and
stay-at-home restrictions.
--EARNINGS RISK
Policymakers see that lower corporate revenues have already pushed wages
lower and taken some pressure off the tighter labour market and now see it as
inevitable the employment situation will worsen, with overtime hours and
part-time workers likely to be cut from here.
The BOJ board is already looking at ways of extending lending to the real
economy and policymakers now have to considers whether or not the BOJ can
maintain its forecasts laid down in the April quarterly Outlook Report or
whether there will need to be a downgrade to the expectation of a H2 recovery in
the July update.
If the outlook for a H2 recovery starts to deteriorate, risks are growing
that more companies will run into financial trouble as cash reserves start to
run out early in H2
A further extension of the Employment Adjustment Subsidy, a government
subsidy program to support firms in retaining workers, could help reduce the
risk of a sharp rise in unemployment.
--Q1 GDP CONTRACTS
Japan's economy contracted for the second straight quarter in Q1, down 0.9%
q/q, or down an annualized 3.4%. The economy was weighed by weak demand in the
private sector on the back of the spread of the coronavirus.
Private consumption, which accounts for about 60% of Japan's GDP, fell 0.7%
q/q in Q1, after a revised 2.9% fall in Q4. The median forecast was for a 1.7%
q/q decline, while business investment fell 0.5% q/q.
--MNI Tokyo Bureau; tel: +81 90-2175-0040; email: hiroshi.inoue@marketnews.com
--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com
[TOPICS: MMJBJI,MMJBJ$,M$A$$$,M$J$$$,MT$$$$,MX$$$$]
To read the full story
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.