MNI POLICY: BOJ: Japan Q2 Output Gap Narrows to +1.04 PPs

     TOKYO (MNI) - Japan's estimated positive output gap narrowed to 1.04

percentage points in the April-June quarter as supply tightened and demand

firmed,falling  from 1.64pp in January-March, the Bank of Japan said Thursday.

     --It was the 11th 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 0.4pp, a figure based on

revised Q2 GDP data of +0.3% on quarter, or an annualized rate of +1.3%.

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

period was estimated to be 0.68%, up from 0.64% for the six months through March

2019, which is within the bank's latest estimate of 0.5-1.0% provided in the

April Outlook Report.

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

1.0% in the April-June quarter, unchanged from Q1.

--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

[TOPICS: M$A$$$,M$J$$$]