MNI INTERVIEW: Vaccine, Govt Policy Recovery Key: Ex-BOJ Momma

Japan will likely extend the current state of emergency beyond the Feb 7 cut-off date, which will put further downside pressure on the economy and make recovery dependent on the success of the vaccine rollout, a former Bank of Japan chief economist told MNI.

In an exclusive interview Wednesday, Kazuo Momma, now executive economist at Mizuho Research Institute, noted the current divergence in the economy, with Japan's output being helped by the strength of the global manufacturing sector.

"However, downward pressure on the economy from weak face-to-face businesses continues. It is difficult to predict when service businesses will recover," he added.

Momma said that whether weak services filter through to the wider economy and whether the labor market and sentiment worsen will depend on government policy.

"I think the government will implement support to prevent the labor market from worsening," Momma said.

Calls to extend the state of emergency are building in government circles as infection numbers increase throughout Japan, local media reported. The final decision is likely after a meeting of experts next week.