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MNI INSIGHT: BOJ Unlikely To Name US Trade Rows in July Report

By Hiroshi Inoue
     TOKYO (MNI) - Bank of Japan officials regard the impact of U.S. trade
disputes on global growth and Japanese exports as a potentially high risk but
they are unlikely to specifically refer to the "protectionist" risk in the
Outlook Report next month unless global demand clearly shrinks, MNI understands.
     BOJ officials see no need to make big changes to their risk assessment and
medium-term outlook for Japan's growth and inflation.
     The BOJ doesn't often change the wording for describing the risk assessment
unless a large shock hits the global economy or financial system, a person who
is familiar with BOJ thinking said.
     The person added that the BOJ doesn't change its main economic recovery
scenario based solely on potential risks.
     After its latest policy meeting on June 14-15, the BOJ board mentioned the
U.S. policies without referring to the recent protectionist moves and
retaliatory measures by its trading partners.
     "Risks to the outlook include the following: the U.S. economic policies and
their impact on global financial markets; developments in emerging and
commodity-exporting economies; negotiations on the United Kingdom's exit from
the European Union and their effects; and geopolitical risks," it said.
     Another person who is also familiar with BOJ thinking said "the U.S.
economic policies" include the risk of the U.S. trade rows with China, Canada,
Mexico and the EU among others, adding that the BOJ doesn't mention details
about the risk for each policy action or incident unless it is having a large
impact on demand or financial trading.
     The person, however, warned that if the U.S. increased the tariffs on
imported vehicles to 25% from the current 2.5% (the import duty on pickups are
already 25%), Japan's exports of automobiles to the U.S., which account for
about 40% of Japanese auto shipments to the world, would be hurt.
     President Trump asked the Commerce Department to probe into the possibility
that automobile imports are threatening U.S. national security. In nine months
from May 23, the department will report its conclusions to the president. Japan
does not impose duties on imported vehicles.
     But BOJ officials view that global demand for Japanese cars and machinery
among other products have not yet been hit by the protectionist U.S. trade
policy and retaliatory actions by other countries. Japanese metal makers are not
suffering greatly from the high U.S. steel and aluminum tariffs imposed in March
because U.S. industries need specialized high-quality metal products that only
Japanese firms can provide.
     In its policy statement in July 2016, the BOJ referred to the downside risk
caused by Brexit as the British vote on June 23 triggered safe-haven yen buying
and a global stock market sell-off, hurting sentiment among Japanese firms and
     "Against the backdrop of the United Kingdom's vote to leave the European
Union and the slowdown in emerging economies, uncertainties surrounding overseas
economies have increased and volatile developments have continued in the global
financial markets," the BOJ board said after the July 28-29 meeting, when it
decided to conduct additional easing.
     On the other hand, five months later, the BOJ didn't specifically refer to
the U.S. presidential election in its December policy statement, although the
November election outcome caused jitters about global trade and investment due
to the President-elect's protectionist policies. 
     In December 2016, the BOJ said, "Risks to the outlook include the
following: developments in emerging and commodity-exporting economies,
particularly China; developments in the U.S. economy and the impact of its
monetary policy on global financial markets; the consequences stemming from the
United Kingdom's vote to leave the European Union and their effects; prospects
regarding the European debt problem, including the financial sector; and
geopolitical risks."
--MNI Tokyo Bureau; tel: +81 90-2175-0040; email:
--MNI Tokyo Bureau; tel: +81 90-4670-5309; email:
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