MNI PREVIEW: BOJ To Lower Economic View; Stand Pat On Policy

--Will Likely Downgrade Assessment; Await July Meet For Outlook Report

By Hiroshi Inoue

     TOKYO (MNI) - The Bank of Japan will likely revise its economic assessment

lower at the June meeting, but stand pat on monetary policy after it moved

between meetings to start an extending lending scheme for smaller businesses,

MNI understands.

     The BOJ is set to maintain its forward guidance suggesting it will "closely

monitor the impact of the Covid-19 for the time being and will not hesitate to

take additional easing measures if necessary."

     Policymakers will likely reconfirm that economic conditions around the

globe remain severe, as predicted in April, although they will note that some

bright spots are being observed.

     --UPPER LIMIT

     The BOJ is studying loan data and bank lending surveys to see whether the

central bank needs to boost or amend its current schemes. Under its current

framework, the BOJ can increase the upper limit of its lending facility from

JPY30 trillion as needed without a formal policy decision.

     At present, the Bank believes that the banking system is sufficiently

capitalized, but if profits dip, their capability to lend will drop.

     The BOJ will discuss where Japan's economy currently sits and when its

recovery will likely get underway, although there is unlikely to be unanimous

agreement on the Board.

     Despite that, the BOJ will say that Japan's economy appeared to have hit

bottom in Q2 as economic activities are resuming after the government lifted its

state of emergency on May 25, with the bank again saying the economy is expected

to improve through the second half of this year.

     --IMF UPDATE EYED

     Bank officials will continue to watch the global economy which is expected

to improve in the second half of the year. The International Monetary Fund will

update its outlook on June 24, earlier than the usual July update, already

indicating it will lower its global economic growth forecast in 2020 from

April's -3.0% as the virus is still spreading in some developing countries

     The June meeting will be positioned as a preliminary skirmish ahead of the

vital July meeting, when board members review the medium-term outlook, with any

changes in financial conditions or consumer confidence likely to drive any

decisions then

--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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