MNI POLICY: BOJ: Japan Q2 Output Gap Narrows +1.02 PPs

     TOKYO (MNI) - Japan's estimated positive output gap narrowed to 1.02

percentage points in the July-September quarter as supply tightened and demand

firmed, down from the 1.03pp fall in April-June, the Bank of Japan said

Wednesday.

     --The result was the 12th straight quarter with a positive output gap,

which should increase pressure on consumer prices and inflation expectations,

albeit with a lag of a few quarters.

     --The BOJ's estimate of the output gap, based on capital and labour stocks,

was wider than the Cabinet Office's latest estimate at 0.6pp, a figure based on

revised Q3 GDP data of +0.4% on quarter, or an annualized rate of +1.8%.

     --The BOJ also said that Japan's potential growth rate for the

April-September period was estimated at 0.57%, up from 0.55% for the six months

through March 2019. This is within the bank's latest estimate of 0.5-1.0%

provided in the October Outlook Report.

     --The Cabinet Office estimates Japan's potential growth rate to be about

1.0% in the July-September period, unchanged from Q2 and Q1. 

--MNI Tokyo Bureau; tel: +81 90-2175-0040; email: hiroshi.inoue@marketnews.com

--MNI Sydney Bureau; +61 405322399; email: lachlan.colquhoun.ext@marketnews.com

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