MNI POLICY: BOJ Index Shows Japan Consumption Loses Momentum

     TOKYO (MNI) - Bank of Japan officials are vigilant against the risk that

consumer spending momentum is weakening as its supply-side Consumption Activity

Index posted the second straight month-on-month drop in August.

     The BOJ supply-side Consumption Activity Index fell a real 0.1% on a

seasonally adjusted basis in August for the second straight drop following -0.0%

(revised down from +0.3%) in July.

     The BOJ will not greatly change its assessment that "private consumption

has been increasing moderately, albeit with fluctuations" based on weak July and

August data, as BOJ officials focus on quarter-on-quarter moves to examine the

underlying trends.

     But the BOJ may consider tweaking its assessment at the October 30-31

policy meeting.

     According to the BOJ, the index in the July-August period was down 0.0% on

quarter for the first drop in two quarters after rising 0.6% in the second

quarter.

     The BOJ's consumption indicator reflects a wide range of sales and

supply-side statistics on goods and services and helps capture the short-term

consumption trend. It has a close correlation to final GDP figures.

     --AT ODDS

     The BOJ data isn't consistent with the government data released earlier in

the day. Japan's real average household spending rose 2.8% on year in August,

thanks to higher spending on transportation and communication, as well as on

education. August's 2.8% rise is the highest seen since August 2015, when it

rose 2.9%.

     The ministry upgraded its assessment on household spending for the second

straight month, saying household spending "is picking up." Previously, the

government said, it is "firm and flat."

     The BOJ's Consumption Activity Index is designed to forecast revised

private consumption, not a preliminary estimate.

--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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