MNI INSIGHT: IMF Outlook Downgrade May Push BOJ Into Action

     TOKYO (MNI) - The Bank of Japan could consider taking fresh policy action

ahead of the March 18/19 meeting following the International Monetary Fund's

warning Wednesday that it is set to downgrade global growth forecasts, MNI

understands.

     The BOJ makes its forecasts for the global economy and the impact on

exports based on the IMF forecasts and downgrades will increase BOJ concern over

downside risks. Although not clear what action the Bank could take, it could see

increased purchases of Exchange Traded Funds, commercial paper and corporate

bond from the current JPY6 trillion, JPY2.2 trillion and JPY3.2 trillion,

respectively.

     Governor Haruhiko Kuroda said Monday that the BOJ will "provide ample

liquidity and ensure stability in financial markets through appropriate market

operations and asset purchases" under the current policy framework, but any

decision to increase purchases of ETFs (exchange traded-funds), commercial paper

and corporate bonds can only be made at a regular or extraordinary policy

meeting.

     Kuroda could also direct staff to consider what possible measures the BOJ

might take to support corporate funding ahead of the end of March 31 fiscal year

if fiscal conditions tighten in coming weeks.

     Current market conditions, with dollar/yen at around JPY107.30 and the

Nikkei's rebound Thursday don't warrant immediate BOJ action and could buy the

BOJ a bit of time to decide on the timing of action.

     Policymakers are fully aware, however, that the BOJ should not fall behind

the curve if the yen appreciates as it did back in September 2008 when the BOJ

refused to take action.

     IMF Managing Director Kristalina Georgieva said Wednesday the global

economic outlook has shifted to "more dire scenarios" as the coronavirus has

spread undetected, though she added that it's still difficult to predict

outcomes.

--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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