MNI POLICY: BOJ To Get Better Sense Of Recovery, Risks In July

By Hiroshi Inoue

     TOKYO (MNI) - The Bank of Japan still expects the economy pick up gradually

in the second half of the year, although the strength of the recovery will only

become clearer around the time of the July policy meeting when there is a better

idea of how social restrictions and consumer confidence will look, MNI

understands.

     But officials know that any recovery will only come after a Q2 performance

that will be far worse than the annualized 3.4% contraction seen in Q1.

     --ONLY APRIL DATA

     The BOJ board will next meet on June 15-16, but analysis of the economic

outlook will be hampered by the fact that policymakers will still be looking

only at April hard data. With no up-to-date information yet about how things are

looking post-outbreak, any forecast will wait until the Outlook Report is

published in July.

     Bank insiders expect production for the second quarter to fall sharply on

the back of weak demand for autos in the U.S. and Europe, with real exports down

around 40% in April alone.

     There are three prerequisite conditions the BOJ is looking at to underpin a

recovery; no second wave of the coronavirus, stable global financial markets and

no serious credit risk. A second wave of infections could stick a spanner in the

spokes of any recovery

     Aggressive accommodative monetary policy by the central banks in advanced

economies and bold fiscal policy by major countries are seen underpinning the

financial markets, but overall officials at the BOJ are perplexed by their

strength, as they feel downside risks of a returning virus are being dismissed

by investors.

     BOJ Governor Haruhiko Kuroda has said that the BOJ will do whatever it can

to both stabilize the financial markets and facilitate lending to the real

economy.

     --IMF TO LOWER GROWTH

     The International Monetary Fund Managing Director Kristalina Georgieva has

recently indicated that the IMF will likely lower its global economic growth

forecast from April's -3.0% following weaker-than-expected GDP in the U.S. and

Eurozone.

     The U.S. and Eurozone economies as well as Japan are widely expected to be

hardest hit by bold lockdown caused by the coronavirus in in Q2, with a pick-up

in US/China tensions now an added threat.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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

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