MNI POLICY: BOJ Export Outlook Intact; To Study IMF Mixed View

By Hiroshi Inoue

     TOKYO (MNI) - Bank of Japan will now build a slower recovery in exports

into their modelling as, in line with normal practice, officials take the

International Monetary Fund's lowered global growth forecasts into the

reckoning, MNI understands.

     Although the bank expects lower exports to weigh on industrial production

and economic growth, although much of the downward pressure will be smoothed by

the government's fiscal measures.

     Although the BOJ takes the IMF forecast as read, they do accept there is

much to take note of in the June update, with a variety of opinions on different

countries, some optimistic, some pessimistic.

     --ALL REGIONS

     The IMF has cut its 2020 global GDP forecast to -4.9% from -3%, saying

every region will contract for the first time ever as the Covid-19 pandemic

continues as deepest slump since the Great Depression worsens. The IMF still

sees the economy picking up in H2, although at a slower pace than initially

seen, with lots of uncertainty over the outlook.

     However, the BOJ notes the IMF's forecast sees a better outcome than that

predicted by both the World Bank and the OECD.

     The IMF places China's growth at 1% for the year, which many BOJ officials

is on the low side as the Chinese economy appears to be on a recovery track.

     Japan's exports to China troughed in April, with May's data showing a 1.9%

y/y fall after a 4% fall in April.

     --OUTLOOK

     The IMF lowered its forecast for Japan's 2020 GDP to -5.8% from April's

-5.2%. The GDP forecast for 2021 was revised down to +2.4% from April's +3.0%.

     The BOJ board is expected to lower the medium-term economic growth forecast

at the July 14-15 meeting when the policymakers will update its view through the

quarterly Outlook Report.

     Above all, the BOJ expects a slow recovery in auto exports weighing on the

wider Japanese economy, but it will likely maintain the view that "Japan's

exports, including inbound tourism consumption, are likely to remain weak" and

the near-term view "exports of automobiles and capital goods are projected to be

under downward pressure, as automobile sales in the U.S. and Europe are expected

to be weak."

--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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