MNI POLICY: BOJ: Japan Q3 Output Gap Narrows to +1.24 PPs

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

supply and firmer demand narrowed to 1.24 percentage points in the

July-September quarter from 1.60 percentage points in April-June, the Bank of

Japan said Tuesday.

     --It was the eighth straight quarter of having a positive output gap, which

is expected to increase 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 -0.2%

percentage point, a figure based on revised Q3 GDP data of -0.6% on quarter, or

an annualized rate of -2.5%, and down from +0.7% point for April-June.

     --The BOJ also said that Japan's potential growth rate for April-Sept was

estimated to be 0.76%, up from 0.73% for the six months through March. It was

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-Sept quarter.

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

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

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