MNI POLICY: BOJ Wakatabe: Virus Ups Uncertainty; Risks Seen

     MATSUYAMA, Japan (MNI) - The BOJ still sees the global economy recovering

gradually but warned of downside risks, including coronavirus, Bank of Japan

Deputy Governor Masazumi Wakatabe said Wednesday.

     "Japan's economy seems to have briefly registered a significant

deceleration in the October-December quarter. However, at this point that such

deceleration is considered temporary," Wakatabe told business leaders in

Matsuyama City.

     However, Wakatabe warned of growing uncertainties, underlining the need to

"closely monitor the downside risks at present."

     "There have been heightening uncertainties regarding the impact of the

spread of the coronavirus on the global economy," he added.

     "Since the downside risks are still significant, the BOJ, while continuing

to carefully examine various risks, will not hesitate to take additional easing

measures if there is a greater possibility that the momentum toward achieving

the price stability target will be lost," Wakatabe added.

     But he didn't elaborate on when and how the BOJ would consider taking

action.

     At the last meeting on Jan. 20-21, the BOJ left monetary policy unchanged,

with little sign Japan's economy has deviated from the baseline recovery view,

although broad downside risks to economic activity and prices remain. The BOJ

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, although the medium-term inflation forecasts were left

broadly unchanged from the three months ago.

     Other key points from Wakatabe's speech:

     -- "There is no guarantee that the decoupling will last for a long time. If

the slowdown in the manufacturing sector becomes prolonged, its impact could

spread gradually to the non-manufacturing sector."

     -- "Uncertainties regarding the impact of the tax hike are still

significant and are considered one of the risks in assessing future economic

activity."

     -- "It is too early to make an assessment on households' spending attitude

at this point, and we would like to carefully examine additional data when they

become available."

     -- "Under the current situation in particular, it is necessary to take into

account the possibility that downside risks to economic activity may materialize

and affect prices."

     -- "The BOJ will continue to carefully examine economic and price

developments and monitor whether the mechanism will be maintained in which the

inflation rate increases toward the price stability target of 2%."

--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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