MNI POLICY: BOJ Lowers GDP, CPI Forecasts; Skips Median F'cast

     TOKYO (MNI) - The Bank of Japan has lowered its median forecasts for growth

and inflation in the current fiscal year as the downturn caused by the

coronavirus outbreak triggers a harsh reassessment of the economy.

     Although admitting the growth forecast was sharply lower, the decided not

to publish the median GDP forecast for GDP and inflation rates, just the ranges,

with the board split on its interpretations of the baseline assumptions offered

by bank officials.

     The BOJ's forecast range for inflation in fiscal 2020 was revised down to a

range of -0.3% to -0.7% from January's range of +1.0% to +1.1%, with the 2021

outlook revised down to between 0.0% and +0.7% from January's +1.2% to +1.6%.

     The forecast for inflation in the FY to March 2023, ending just before

Governor Haruhiko Kuroda's term ends April 8, was in a range of +0.4% to +1.0%,

which if correct means he will not hit the 2% price target during a decade in

charge.

     The forecast for GDP in this fiscal year was revised down to a range of

-3.0% to -5.0% from the +0.8% to +1.1% outlined in January. The median forecast

for GDP in fiscal 2021 was revised up to a range of +2.8% to +3.9% from

January's range of +1.0% to +1.3%, now incorporating the impact of the

government economic package. The forecast for GDP in fiscal 2022 -- a first

forecast -- is between +0.8% and +1.6%.

     Other key points from the Outlook Report:

     ECONOMY, PRICES

     --"Japan's economy is likely to remain in a severe situation for the time

being due to the impact of the spread of the coronavirus at home and abroad."

Japan's inflation rate "is expected to be somewhat weak for the time being,

mainly affected by the spread of the coronavirus and the decline in crude oil

prices."

     --The BOJ, like the International Monetary Fund, expects the impact of the

coronavirus to wane on a global basis through the second half of 2020.

     --Japan's economy is likely to improve afterward, supported by

accommodative financial conditions and the government's economic measures, as

well as through the expected materialization of pent-up demand.

     --"Risks to both economic activity and prices are skewed to the downside,

mainly due to the impact of coronavirus."

     INFLATION EXPECTATIONS

     --The BOJ lowered its assessment of inflation expectations, saying, "As for

inflation expectations, relatively weak indicators have been observed."

     THREE RISKS

     --The first is the impact of the spread of coronavirus on domestic and

overseas economies. There are high uncertainties regarding the consequences of

the spread of coronavirus, the timing of the spread subsiding, and the magnitude

of its impact on domestic and overseas economies until the spread subsides."

     --The second risk is firms' and households' medium- to long-term growth

expectations. "If such expectations decline, triggered mainly by the spread of

coronavirus becoming prolonged, there is risks that their appetite for spending

will not increase easily even after the spread subsides."

     --The third risk is developments in the financial system. "If the impact of

the spread of coronavirus lasts longer than expected, there is a risk that

deterioration in the real economy will affect financial system stability,

thereby exerting further downward pressure on the real economy.

--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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