MNI POLICY: BOJ Alert For Weaker Private Spending

Bank of Japan officials expect the latest emergency to have a smaller impact on private consumption than the more stringent measures imposed last year but they are concerned about weaker spending should sentiment start to worsen in areas outside the emergency zones, MNI understands.

The government declared a month-long emergency starting Jan. 7 for 11 prefectures, including Tokyo, Osaka, and Kyoto, to contain resurgent virus infections. But high-frequency data show that crowds in other prefectures have thinned since. On Tuesday, the government extended the emergency by another month to March 7 in 10 of the 11 areas with the exception of Tochigi, north of Tokyo, where the virus situation has improved.

EXPENSIVE PURCHASES

So far, consumer spending, such as on durable household goods like appliances, has remained solid despite last year's drop in bonuses and weak wages.

BOJ officials think wealthy people unable to travel overseas have made expensive purchases, complicating the task of assessing the underlying trend of private consumption.

Officials expect exports and production to hold steady, keeping the economy on a moderate recovery path with activity supported by government subsidies. However, bank officials are mindful that a bigger than expected drop in private consumption could increase downward pressure on the economy.