MNI INSIGHT: Japan Recovery May Be Slower Than First Seen: BOJ

--Asian Economies Picking Up, But Fresh US/China Tensions A Concern

By Hiroshi Inoue

     TOKYO (MNI) - The Bank of Japan believes the economy hit bottom in either

April or May and will now start to pick up into the second half of the year,

although pent up demand from both consumers and businesses could be less than

previously expected, MNI understands.

     The economy is, however, currently in  weaker position than hoped for at

the time of the BOJ's April meeting, as the national state of emergency lasted

longer into May than originally expected.

     Overall, it sees most Asian regional economies having hit bottom and

looking set for a steady, if not spectacular, recovery in exports, although the

re-emergence of trade and diplomatic disputes between China and the U.S. could

threaten global trade and further impact Japan's overseas sales.

     --DOMESTIC CONFIDENCE IMPROVES

     The bounce in Japan's consumer confidence index, rising to 24.0 for the

first gain in 5 months and recovering from the 16-year low hit last month, has

offered BOJ officials a glint of light at the end of the tunnel, although the

economy is recovering from a very low base.

     Bank analysis suggests that the government's May 14 decision to lift the

state of emergency for 39 of the country's 47 prefectures was a main factor

behind the pick up in confidence. The emergency threat level has now been

removed nationwide, although an air of caution remains with consumers await a

vaccine or cure for Covid-19 can be found.

     --TOURIST TRAP

     Businesses in tourist services, such as hotels, amusement parks and travel

will remain sluggish as foreign visitors will stay away until medical advances

are in place.

     The BOJ will get a look at the latest Economy Watchers Survey, conducted in

the last week of May, on June 8, to see how government health policy is

impacting sentiment.

     The survey indicates whether respondents with jobs most sensitive to

economic conditions -- taxi and truck drivers, department-store sales staff and

restaurant and shop owners -- think economic have improved or worsened over the

last three months.

     BOJ officials are also studying higher frequency data such as "Mobility

Trends Reports" by Apple and "COVID-19 Community Mobility Reports" by Google, to

better gauge the strength of the recovery, although those data fluctuate

sharply.

--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: M$A$$$,M$J$$$,MT$$$$,MX$$$$,MGJ$$$]