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MNI (London)
     TOKYO (MNI) - The Bank of Japan lowered its economic assessment Monday,
reacting to the spread of coronavirus and saying downside economic risks have
heightened.
     "Japan's economic activity has been weak recently due mainly to the impact
of the outbreak of the novel coronavirus. Specifically, exports and production
have declined due to the slowdown in overseas economies since last year as well
as the decrease in external demand mainly from China and the effects of the
global supply chains of stopping production," a BOJ commentary said.
     The bank also pointed to a tightening of financial conditions for small and
medium-sized companies.
     "Although financial conditions are accommodative on the whole, they have
become less accommodative, as seen partly in corporate financing such as the
financial positions of small and medium-sized firm."
     --INFLATION
     The BOJ slightly lowered its inflation outlook, saying, "expectations have
been more or less unchanged from a somewhat longer-term perspective, but
somewhat weak indicators have been observed recently."
     As for the near-term outlook, the BOJ said, "Japan's economic activity is
likely to remain weak for the time being, mainly affected by the outbreak of
COVID-19."
     --OPTIMISM
     But the BOJ stuck to the view that the economy is expected to return to a
moderate expanding trend, supported by a virtuous cycle from income to spending,
with the impact of the virus outbreak waning mainly owing to measures taken by
each country.
     Japan's inflation rate is, however, expected to remain somewhat weak for
the time being, partly due to the effects of the decline in crude oil prices.
     "Furthermore, the effects of recent developments in crude oil prices on
economic activity and prices also warrant attention," the BOJ said.
     "With regard to risks to the outlook, there have been significant
uncertainties over the consequences of the outbreak of COVID-19 and over the
size and the persistence of their impact on domestic and overseas economies,"
the BOJ said.
     "Downside risks seem to have been increasing, and it also is necessary to
pay close attention to their impact on developments in global financial markets
as well as on firms' and households' sentiment in Japan," the BOJ said.
--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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MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com