MNI POLICY: IMF Ups Japan GDP To 1.1% 2018 From 1.0% in July

--IMF WEO Keeps Japan 2019 GDP Forecast At 0.9%

     TOKYO (MNI) - The International Monetary Fund has modestly upgraded its

forecast for Japanese economic growth in 2018 to 1.1% from 1.0% in July, but has

kept its 2019 GDP forecast at 0.9%, the latest IMF's World Economic Outlook said

Tuesday morning at their annual meeting in Bali.

     Here are the key points from the portion of the IMF's October WEO related

to Japan:

     --"Japan's growth is projected to moderate to 1.1% in 2018 (from a strong,

above-trend outturn of 1.7% in 2017), before softening to 0.9% in 2019," the IMF

said. 

     --The 0.1 percentage point downward revision for 2018 relative to the April

2018 WEO is largely due to the contraction observed in the first quarter of

2018. Given the uptick in growth and domestic demand in the second quarter of

2018, this is likely to represent a temporary dip rather than the beginning of a

turn in the cycle."

     --The IMF said Japan's medium-term prospects are impeded by unfavorable

demographics and a trend decline in the labor force.

     --Japan's policy rate is expected to close to zero percent through the end

of 2019. "Accommodative monetary policy remains appropriate in Japan," the IMF

said. With inflation not expected to reach the target over the next five years,

"a sustained accommodative monetary stance is also a necessity. The Bank of

Japan recently reinforced its commitment to reflate the economy by introducing

forward guidance on policy interest rates and increasing flexibility of market

operations to make the accommodative monetary stance more sustainable."

     --Headline inflation is expected to increase to 1.2% in 2018, up from 0.5%

in 2017, mainly due to rising global energy prices. Inflation excluding fresh

food and energy prices is expected to rise to 0.5% in 2018 and further to 0.8%

in 2019, up from 0.1% in 2017, the IMF said. "Inflation is still expected to

remain below the Bank of Japan's target over the five-year forecast horizon,

given tepid wage growth and stickiness in inflation expectations," the IMF said.

     --Japan's debt trajectory needs to be anchored by a credible medium-term

fiscal consolidation plan, which should be based on gradual increases in the

consumption tax rate beyond the 2 percentage-point increase envisaged for

October 2019, the WEO notes. However, in the short term, premature fiscal

tightening should be avoided in order to support growth momentum and reflation.

--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

--MNI Washington Bureau; tel: +1 202-371-2121; email: kevin.kastner@marketnews.com

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