Trial now

5-Year Auction Fares Better Than 2-Year Sale


Consolidating Ahead Of Key Support


Brent Buoyed Toward $80/bbl

MNI (London)
By Hiroshi Inoue
     TOKYO (MNI) - The Bank of Japan will consider lengthening the calendar
duration of its forward guidance on policy rates beyond "at least through spring
2020" if the economy doesn't pick up by the second half of this year, MNI
     As the global economy slowed on the back of a sluggish China economy,
Japan's exports and industrial production, major engines for a sustainable
economic recovery, remained weak in Q1 and BOJ economists will look closely this
quarter for a recovery.
     With downside risks acknowledged for the rest of this year and current easy
policy in place at least through Q1 2020, the central bank must also judge the
impact of the planned October consumption tax hike on consumer spending, which
will only become fully apparent in Q1 2020.
     BOJ officials think the BOJ's current guidance is appropriate, as they base
it on the International Monetary Fund's view that Japan's economy is expected to
gain the momentum in or after mid-2019.
     However, China's economy, which was showing early signs of a pick up, could
be hit by a worsening of the trade dispute with the U.S. and that will throw a
shadow over a global economic recovery, dampening further Japan's exports.
     Japan's share of exports in world trade has decline recently, due in part
to a decrease in demand capital goods, with shipments for the January-March
period falling 7.6% on quarter, although BOJ analysis suggests the drop can be
explained almost entirely by the negative contribution of Asia-specific factors.
     IT-related exports have also slowed, although the BOJ believes the current
adjustment phase, beginning in Q218, may hit bottom in the second half of this
year. This is based on its analysis that past trends show cycle adjustments take
an average of 5-6 quarters to complete.
     At the April 24-25 meeting, the BOJ clarified its forward guidance for
policy rates, clarifying it will patiently maintain easy policy as it will take
an extended time to achieve the 2% price target. Continued heightened
uncertainties over the global economy were a further factor in its thinking.
     The BOJ said it intends to maintain the current extremely low levels of
short- and long-term interest rates for an extended period of time, "at least
through around spring 2020," taking into account uncertainties regarding
economic activity and prices including developments in overseas economies and
the effects of the scheduled consumption tax hike. Governor Haruhiko Kuroda said
that low rates would remain in place for quite a long time beyond the announced
spring 2020 period.
--MNI Tokyo Bureau; tel: +81 90-2175-0040; email:
--MNI London Bureau; tel: +44 203-586-2225; email:
MNI London Bureau | +44 203-865-3812 |