MNI POLICY: BOJ Vigilant Against How Q4 GDP Cld Slow

Japan's economic rebound in the third quarter had little impact on the Bank of Japan's economic view as bank officials are focused on how economic growth evolves in the fourth quarter, MNI understands.

Japan's economy grew for the first time in four quarters in Q3, rising 5.0 q/q, or an annualized 21.4%, boosted by private consumption and net export, preliminary GDP data released by the Cabinet Office Monday showed.

Economic growth in the third quarter was the strongest growth recorded since comparable data became available in 1980.

BOJ economists expected economic activity to have rebounded sharply in the third quarter after the big contraction in the second quarter, as the economy was hard hit by the impact of the coronavirus lockdowns.

The BOJ view is to focus on the recovery path for the economy.

The central bank expects the economy to continue to grow in Q4, but is worried that the pace of economic growth will slow amid the continued pandemic.

The BOJ's baseline scenario is based on the assumption that Covid-19 will not spread again on such a large scale that wide-ranging public health measures will need to be reinstated.

Prime Minister Yoshihide Suga said on Friday that Japan's resurgent outbreak has not reached a point that the government has to review its travel subsidy program, or consider declaring a state of emergency.

Japan reported 1,422 infections on Sunday, more than 1,000 for the six straight day.

The BOJ board's median forecast for economic growth this fiscal year was revised down to -5.5% in October from July's -4.7% but the median economic growth in fiscal 2021 was revised up to +3.6% from July's +3.3%.

The Q2 GDP was revised to -8.2% q/q from -7.9% q/q and to an annualized -28.8% from -28.1%.

BOJ economists expect exports and production to remain firm in the fourth quarter but they maintain the view that capital investment will remain weak, as businesses are cautious about implementing capex amid uncertainties over global demand and falling corporate profits.

They also expect private consumption to be partly boosted by the government's "Go To Travel" and "Go To Eat" campaign but they don't expect the consumption to gain momentum amid the spread of the coronavirus.