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MNI POLICY: BOJ Wakatabe: Tax Hike May May Weigh On Econ

MNI (London)
--Wakatabe: Still Downside Risks That Need Attention
     AOMORI, Japan (MNI) - Bank of Japan Deputy Governor Masazumi Wakatabe
warned Thursday the consumption tax hike planned in October may push economic
activity and prices lower.
     Speaking to business leaders in Aomori City, northern Japan, Wakatabe also
noted that further attention must be paid to the "downside risks to the main
scenario".
     Wakatabe said the BOJ still had ammunition, citing QQE, a negative interest
rate policy, and forward guidance as future policy tools that the BOJ will take.
     However, he doesn't see imminent additional easing, saying, "It is
appropriate to maintain the current policy framework in which it clearly commits
to the price stability target of 2% and pursue the monetary easing to achieve
the target."
     He also warned that persistent or prolonged trade friction will add to the
downward pressure on the global economy, not just through direct effects from
higher tariffs, but also through deteriorating sentiment in the financial
markets and slower corporate capex spending.
      "The global economic growth rate is projected to increase somewhat from
the  second half of 2019 but this scenario entails substantial uncertainties,"
he said.
     At the latest policy meeting on June 19-20, the BOJ left policy unchanged,
restating the forward guidance for policy rates, saying it will maintain the
easy policy "at least through around spring 2020", seeing Japan's economy
continuing to expand moderately despite growing downside risks.
     The next policy-setting meeting is scheduled for July 29-30 when the board
updates its quarterly Outlook Report, including economic growth and inflation
rate forecasts until fiscal 2021.
     Other key points from Wakatabe's speech:
     --Through Japan's battle against deflation and the U.S. and European
economies following the Global Financial Crisis, policy tools such as QQE,
negative interest rates and forward guidance have been added to the central
banks' "arsenal". "They will be used going forward depending on the situation." 
     --"If the slowdown in overseas economies becomes prolonged, downward
pressure on domestic demand may strengthen gradually. In addition, there remains
a risk that the scheduled consumption tax hike this October may push down
domestic demand and eventually economic activity and prices."
     --Wakatabe stuck to the 2% price target, saying, "Setting the target level
at 2% is a global standard; if we lowered the target, deflationary pressure
would be exerted through changes in people's expectations as well as in foreign
exchange rates and asset prices."
     --"Japan's economy has maintained its trend of moderate expansion, although
exports and industrial production have been affected by the slowdown in overseas
economies."
     --"The main scenario is that the economy is likely to continue expanding
moderately as a trend, with the growth rates of overseas economies rising
somewhat and domestic demand maintaining its firmness," he said.
--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
[TOPICS: MMJBJ$,M$A$$$,M$J$$$,MT$$$$]
MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com
MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com

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