MNI POLICY: BOJ: Japan Q2 Output Gap Widens To +1.86 PPs

     TOKYO (MNI) - Japan's estimated positive output gap resulting from tighter

supply and firmer demand widened to 1.86 percentage points in the April-June

quarter from 1.63 percentage points in January-March, the Bank of Japan said

Wednesday.

     --It was the seventh straight quarter of the output gap being in positive

territory, with the improvement expected to increase upward pressure on consumer

prices and inflation expectations with a lag of a few quarters.

     --The BOJ's estimate of the output gap, which is based on capital and

labour stocks, was wider than the Cabinet Office's latest estimate at 0.5%

percentage point, a figure based on revised Q2 GDP growth of +0.7% on quarter,

or an annualized +3.0%, and up from +0.1% point for the January-March period.

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

six-month period from April to June 2018 was estimated to be 0.78%, down from

0.81% for the October 2017-March 2018 period. It was within the bank's latest

estimate in a range of 0.5% to 1.0% which was provided in the July Outlook

Report.

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

1.1% in the April-June quarter, unchanged from the previous three months.

--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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