MNI POLICY: BOJ Concerned By Biz Sentiment Dip, Minus Index

By Hiroshi Inoue

     TOKYO (MNI) - There is some surprise at the Bank of Japan over the

significant worsening of business sentiment in April as the coronavirus

restriction spread, particularly the dip in the hospitality sector, that sees

sentiment stuck below levels noted in the financial crisis a decade ago.

     Although the forward looking indicators in the April surveys suggest some

upside, albeit still at very low levels, the BOJ now thinks those outlooks are

optimistic and the current condition data could worsen further in May after

Prime Minsiter Shinzo Abe extended the state of emergency to May 31.

     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 conditions have improved or

worsened over the last three months.

     --RECORD LOW

     The Economy Watchers sentiment index for Japan's current economic climate

fell 6.3 points to a record low 7.9 in April a seasonally adjusted basis, after

falling 13.2 points to 14.2 in March.

     Officials at the BOJ were shocked by the dip into negative territory of the

index related to eating and drinking services, as such a reading is both

unprecedented and, due to calculation methodology, regarded as mathematically

unlikely.

     The index fell 2.8 points from a year earlier to +1.2 but the index fell

3.8 points to -3.1% on a seasonally adjusted basis in April, showing business

conditions among eating and drinking services worsened considerably in the wake

of the stay-at-home containment measures put in by the government.

     The Watchers outlook index for two to three months ahead showed a fifth

straight drop in April, falling 2.2 points to 16.6 after falling 5.8 points to

18.8 in March.

     --OPTIMISTIC VIEW

     The small dip in April compared with March indicated that people had been

expect the economic conditions to stabilise and gradually pick up, the BOJ

thought, but that outlook will be hit by the extended restrictions, with the

further concern that rising job losses and lower earnings in coming months will

further hit sentiment.

--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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