REPEAT: MNI INSIGHT: BOJ Delays Estimates of Trade Row Impact

--BOJ Officials Expect Clearer Outlook Before July 30-31 Meeting

By Hiroshi Inoue

     TOKYO (MNI) - Bank of Japan officials are delaying by a few weeks the

process of making internal estimates of the drag from U.S. trade disputes on

Japan's growth and exports as it is difficult to predict how things will develop

at this point, MNI understands.

     BOJ economists usually produce estimates at an early stage for the impact

of internal and external shocks to the economy based on certain assumptions for

foreign exchange rates, stock prices and sentiment.

     --WIDE ASSUMPTIONS

     But this time, they find it hard to make assumptions. The U.S. has

threatened to impose high tariffs on various imports from various countries but

some have not been put into effect.

     It is technically possible for the BOJ to create the best and worst case

scenarios based on some preconditions but the estimates may be "meaningless" as

there are so many uncertainties, a person who is familiar with BOJ thinking

said.

     It is uncertain how the protectionist U.S. economic policies and

retaliatory actions by its trading partners will affect the dollar/yen exchange

rate, share prices, business sentiment and capital investment plans, he said.

     --DIRECT, INDIRECT EFFECTS

     Another person who is also familiar with BOJ thinking said the BOJ needs to

watch for both the direct trade impact and second-round effects on Japanese

growth, exports and financial markets.

     As for the direct impact, the trade rows involving various parts of the

world could cut global demand, leading to slower Japanese exports of vehicles

and machines to the U.S., China and Europe. A sharp decline in demand for final

goods would then hurt Japanese exports of high-tech parts and devices.

     Higher volatility in the financial markets could prompt companies to delay

investment plans.

     --ESTIMATES PRE-JULY MEETING

     BOJ officials expect their outlook for trade disputes and global demand is

likely to become clearer a few weeks before the bank's next policy meeting on

July 30-31, when the board updates its quarterly growth and inflation

projections for the next three years.

     In its April Outlook Report, the BOJ slightly revised up its Japanese GDP

growth projections: 1.6% in fiscal 2018 (1.4% in January), 0.8% in fiscal 2019

(0.7% in January) and 0.8% in fiscal 2020 (the first forecast).

     BOJ economists are waiting for the International Monetary Fund's World

Economic Outlook due in mid-July, which may provide some clues to how the BOJ

should look at the global impact of the trade issues.

     But at the same time, BOJ officials know that the IMF does not make major

changes to its forecasts before large shocks have had effects on global growth.

     In April, the IMF warned of factors such as an impending trade war between

the US and China and its residual effects on global cooperation, as well as

tighter financial conditions, but it predicted relatively high growth.

     In the April WEO, the IMF forecast world output would rise 3.9% in both

2018 and 2019, unchanged from its January update. It revised up its projection

for the U.S. economic growth to 2.9% in 2018 and 2.7% in 2019, both by 0.2

percentage point.

--MNI Tokyo Bureau; tel: +81 90-4670-5309; email: max.sato@marketnews.com