REPEAT: MNI INSIGHT: BOJ Outlook Concern Despite GDP Revision

Repeats Story Initially Transmitted at 01:45 GMT Jun 10/21:45 EST Jun 9

By Hiroshi Inoue

     TOKYO (MNI) - The Bank of Japan is growing increasingly concerned over the

outlook for Japan's recovery as global downside risks have increased since their

April policy meeting, MNI understands.

     Despite the modest upward revision in Japanese Q1 GDP data, the BOJ remains

cautious, as escalating trade friction has clouded its view that the global

economy will pick up later this year and into 2020.

     Japan's GDP grew 0.6% on quarter, or an annualized 2.2%, revised from +0.5%

q/q and 2.1% y/y respectively, boosted by stronger capital investment and the

positive contribution from net exports.

     --SLUGGISH DEMAND

     Although the GDP headline data was encouraging for BOJ officials, there was

an acceptance that the pick-up was largely due to public works spending and net

exports -- and the 0.4 percentage point positive contribution from net exports

came from weak imports, suggesting sluggish domestic demand.

     First quarter growth came despite the weaker real export index (-1.7% q/q)

and industrial production (-2.5% q/q).

     Both picked up in April, suggesting a solid start to Q2, but the BOJ sees

no sign of momentum building, noting the closely watched output data could have

been skewed by a last-minute manufacturing push before the extended 10-day

Golden Week holiday season.

     --GLOBAL SLOWDOWN

     Going into the June 19-20 policy meeting, the BOJ will looking for any

clues as to the underlying trend for both production and the wider exports

picture before considering any adjustment of its overall outlook for the

economy.

     The state of the global economy will be a major consideration and the

International Monetary Fund and the World Bank both downgraded their economic

outlooks, citing the escalating trade tensions, will weigh on the BOJ's

thinking.

     G20 finance ministers and central bankers, meeting in Fukuoka, Japan also

warned on Sunday that intensified trade tensions threaten an expected recovery

in the global economy later this year.

--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