MNI POLICY: BOJ: Japan Q4 Output Gap Widens to +2.23 PPs

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

supply and firmer demand widened to 2.23 percentage points in the

October-December quarter, up from 1.26 percentage points in July-September, the

Bank of Japan said Wednesday.

     --It was the ninth straight quarter with a positive output gap, which is

expected to increase pressure on consumer prices and inflation expectations,

albeit 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 0.0%

percentage point, a figure based on revised Q4 GDP data of +0.5% on quarter, or

an annualized rate of +1.9%.

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

2018 was estimated to be 0.66%, unchanged from 0.66% for the six months through

September 2018, which is within the bank's latest estimate of 0.5-1.0% provided

in the January Outlook Report.

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

1.0% in the October-December quarter.

--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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