MNI POLICY: BOJ Ups GDP F'casts; Inflation View Little Changed

--Momentum For 2% price target intact, but Not Sufficiently Firm

--No Signs of Asset Bubble, activities of financial firms

     TOKYO (MNI) - The Bank of Japan has upgraded its median forecasts for real

economic growth rates in this fiscal year, fiscal 2020 and fiscal 2021, boosted

by the government's latest economic stimulus measures.

     The Bank's medium-term inflation forecasts were left broadly unchanged from

the three months ago, with no noticeable pick-up inflation expectations.

     Despite the subdued inflation forecasts, the BOJ maintained its view that

"momentum toward achieving the 2% price target is maintained but that it's not

sufficiently firm."

     Other key points from the Outlook Report:

     --The median forecast for gross domestic product in the current fiscal year

was revised up to +0.8% from +0.6% and the GDP forecasts in fiscal 2020 and 2021

were also revised up to +0.9% and +1.1% from +0.7% and +1.0% made in October,

respectively.

     --Despite the upwardly revised GDP forecast, the inflation forecasts were

slightly revised slightly lower from three months ago.

     --The median forecast for core inflation rate in the current fiscal year

was revised to +0.6% from +0.7% and the inflation forecasts in fiscal 2020 and

2021 were revised to +1.0% and +1.4% from +1.1% and +1.5% made in October, but

noted risks "remain skewed to the downside."

     --The BOJ maintained its cautious view on overall view on risks, noting

they remain "skewed to the downside, particularly regarding developments in

overseas economies."

     --The BOJ noted no excessive bullish expectations over asset markets, but

said "prolonged downward pressure on financial institutions' profits ... could

create risks of a gradual pullback in financial intermediation and of

destabilizing the financial system."

     --Japan's consumer price index "has continued to show relatively weak

developments compare to the economic expansion and the labour market

tightening", but the rate is likely to increase toward 2% "mainly on the back of

the output gap remaining positive and medium- to long-term inflation

expectations rising."

     --The BOJ also kept its optimistic view on the outlook for the output gap,

saying it had narrowed to 1.02 percentage points in Q3 in recent time, but would

widen again in the future as overseas markets recover.

     --The result was, however, the 12th straight quarter with a positive output

gap, which should increase pressure on consumer prices and inflation

expectations, albeit with a lag of a few quarters.

--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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