MNI POLICY: BOJ Lowers Inflation F'cast; Bigger Downside Risks

     TOKYO (MNI) - Following weak inflation readings in the April-September

period, the Bank of Japan board revised down its medium-term inflation

projection for the current fiscal year to 0.9% from the 1.1% outlined in July,

the BOJ quarterly Outlook Report released Wednesday showed.

     The BOJ also lowered their median inflation rate in fiscal 2019 to 1.4%

from the 1.5% seen in July and the median inflation rate in fiscal 2020 was also

lowered to 1.5% from 1.6% previously.

     Other key points from the Outlook Report:

     --The BOJ board remains vigilant over the outlook for inflation rate,

saying, "Risks to both economic activity and pries are skewed to the downside."

     --The BOJ said, "The momentum toward achieving the price stability target

of 2% is maintained but is not yet sufficiently firm, and thus developments in

prices continue to warrant careful attention."

     --Easing of upward pressure on costs on prices stemming from the yen's

appreciation through early spring pushed CPI lower initially, but such downward

pressure has been weakening recently.

     --The BOJ board noted greater downside risk to the economy, saying, "risks

are skewed the downside, particularly regarding developments in overseas

economies." The BOJ had previously seen risks to the economy as largely

balanced.

     --The board's overall assessment of side-effects from the easy policy is

largely unchanged from July, but the board increased its vigilance against the

risks a little.

     --The bank also repeated: "Examining financial imbalances from a

longer-term perspective, there is no sign so far of excessively bullish

expectations in asset markets or in the activities of financial institutions."

     --But the Board warned, "Prolonged downward pressure on financial

institutions' profits, with the low interest rate environment and severe

competition among financial institutions continuing, could create risks of a

gradual pullback in financial intermediation and of destabilizing the financial

system."

     --The BOJ noted these risks are judged as not significant at this point as

financial institutions have sufficient capital bases but "it is necessary to pay

close attention to future developments."

--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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