MNI INSIGHT: BOJ Sees Fiscal Pack A Help, But No Game Changer

By Hiroshi Inoue

     TOKYO (MNI) - Japan's up to Y25 trillion fiscal stimulus package will be a

welcome fillip for the economy going into 2020 boosting GDP by up to 0.8% on the

year, but the Bank of Japan is unlikely to upgrade its overall outlook for the

economy on the back of it, MNI understands.

     Prime Minister Shinzo Abe's government is reportedly planning a Y13

trillion spending blitz, with hopes for a near-doubling to Y25 trillion when

local government and private sector initiatives are added on.

     Although there will undoubtedly be some boost to an economy slowed

following the October sales tax hike and by sluggish overseas demand, the BOJ

sees the impact at home diminished somewhat as any large-scale public works

programs will be slow to get going due to labor shortages.

     However, the stimulus will likely be large enough for the BOJ to stand pat

on additional easy policy any time soon.

     --BASELINE VIEW INTACT

     Even with the stimulus, BOJ economists see no change to the baseline view

that the economy will see a moderate recovery in Q1 2020 after contracting in

the current quarter and with no sign of a pick-up in either the global economy

or domestic inflation levels, the central bank remains cautious.

     The slowdown in global auto sales and weak capital investment continues to

weigh on Japan's export sector and is affecting many manufacturers across all

sector in Japan.

     The new stimulus package isn't seen giving a fresh boost to inflation

levels either, with BOJ economists not expecting a pick-up in momentum towards

higher prices.

     --DEC TANKAN EYED

     The December Tankan Survey, due on Dec 13, is the next big data point for

the BOJ to focus on, particularly any revisions to capex plans. The September

release saw some modest downward revisions in both sentiment and investment

plans, but overall held up better than expected.

     The focus now is whether-or-not there has been any further downgrades in

investment plans with no early recovery for the global economy, although the

current yen level and stability in financial markets bodes well for future capex

plans.

--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

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