MNI POLICY: BOJ Sees Solid Underlying Consumption Trend

     TOKYO (MNI) - Bank of Japan officials see that the underlying trend of

private consumption remains solid and they expect spending to follow a

"moderate" uptrend, MNI understands.

     The BOJ's supply-side Consumption Activity Index released Tuesday showed

that it posted the first quarter-on-quarter rise in two quarters in April-June,

up 0.4% after -0.5% in January-March.

     In June alone, the index also rose a modest 0.4% on month for the first

rise in two months after -1.0% in May and +1.8% in April.

     BOJ officials see no need to change the current view that "private

consumption has been increasing moderately, albeit with fluctuations, against

the background of steady improvement in the employment and income situation."

     They are focused on preliminary gross domestic product data for the second

quarter due out Friday to examine how spending rebounded after slumping in the

winter months, hit by severe weather conditions.

     BOJ officials remain vigilant against the risk that volatile financial

markets caused by the U.S.-China trade dispute will dampen consumer sentiment

and spending.

     Japan's gross domestic product for the April-June quarter is expected by

economists to have expanded a modest 0.2% on quarter, or an annualized 1.0%,

rebounding from what many see as a temporary slump in Q1, thanks to solid

consumption and business investment.

     The expected Q2 growth will follow the first contraction in nine quarters

in January-March, when GDP fell 0.2% on quarter, or an annualized 0.6%.

     The median forecast for private consumption, which accounts for about 60%

of GDP, is 0.3% on quarter in Q2 (ranging from +0.2% to +0.4%) following -0.1%

in Q1.

     The BOJ's Consumption Activity Index is designed to forecast revised

private consumption, not a preliminary estimate.

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

--MNI Tokyo Bureau; tel: +81 90-4670-5309; email: max.sato@marketnews.com

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