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MNI (London)
--Business Sentiment To Worsen In March Tankan: Momma
By Hiroshi Inoue
     TOKYO (MNI) - Japan's economy could contract in the first quarter, tipping
the country back into recession, as the fallout from the coronavirus outbreak
delays a recovery from the sharp downturn seen in Q4, a former Bank of Japan
chief economist told MNI in an interview recently.
     "Looking ahead, the economy for the first quarter also will be severe. But
it is uncertain how the impact of the coronavirus has affected the economy as
data isn't available yet," said Kazuo Momma, now executive economist at the
Mizuho Research Institute.
     Japan's economy posted a first contraction in five quarters in Q4, down
1.6% q/q, or an annualized -6.3%, weighed by weak private demand in the wake of
an October sales tax hike and a string of natural disasters.
     "The contraction in Q4 was largely within forecast. Economists had expected
the economy to contract about an annualized 4%. A contraction of 5% or 6% is in
the allowance, margin of error," Momma said.
     "Capital investment was weaker than expected due partly to the reaction to
the last-minute spending before the tax hike. But the underlying trend isn't so
weak, although capex is expected to slow," he said.
     The March Tankan will likely show sentiment among both manufacturers and
non-manufacturers will worsen sharply from December's levels, as the negative
impact of the coronavirus and slowing economic activity spreads, Momma said.
     Policymakers will likely say the underlying trend remains solid as the
slowdown is temporary, and will pick up around the summer, Momma said.
     He warned, however, that even if the downturn is short-lived but
significant, unemployment and corporate profits would worsen - and slowing
corporate profits would further impact sentiment into the Tankan survey.
     The government has already implemented measures to help the economy and any
further action would depend on the severity of the coronavirus outbreak, Momma
--MNI Tokyo Bureau; tel: +81 90-2175-0040; email:
--MNI London Bureau; tel: +44 203-586-2225; email:
[TOPICS: MMJBJ$,M$A$$$,M$J$$$,MT$$$$,MX$$$$]
MNI London Bureau | +44 203-865-3812 |

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