MNI China Daily Summary: Monday, March 11

MNI: PBOC Conducts CNY10 Bln Via OMO Mon; Liquidity Unchanged

MNI: PBOC Sets Yuan Parity Lower At 7.0969 Mon; -3.09% Y/Y

CHINA PBOC INJECTS CNY10 BILLION VIA 7-DAY REVERSE REPOS MON

CHINA SETS YUAN CENTRAL PARITY AT 7.0969 MON VS 7.0978

MNI BRIEF: China February CPI Rises To 1-Year High

EZ/UK T-Bill Calendar: ES, IT, BE, FI, Auction on Tuesday

Bond Supply Calendar: Netherlands, UK, Germany Auction Tuesday

Week Ahead in Macro

MNI BRIEF: Poilievre Calls QE 'Scam' And Would Limit BOC Remit

MNI: Growth Drag From Net Zero Carbon Goal Can Be Offset-OECD

MNI BRIEF: Lawmakers Signal Tough Hearing For BOC's Macklem

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REPEAT: MNI INSIGHT: BOJ To Cut CPI Forecast, Maintain Policy 

Repeats Story Initially Transmitted at 06:05 GMT Oct 16/02:05 EST Oct 16
By Hiroshi Inoue
     TOKYO (MNI) - The Bank of Japan board is expected to revise down its median
forecast for the consumer inflation rate in the current fiscal year from the
1.1% predicted in July to 1% or slightly lower due to continued weak price
moves, MNI understands. 
     However, at its two-day meeting on Oct. 30-31, the board will not changed
the estimated timing for hitting the current 2% price target from "around fiscal
2019", which it pushed back from "fiscal 2018" in July. 
     The BOJ board is also expected to stand pat on monetary policy as it
continues to see the momentum toward achieving the price target being
maintained, even though the improvement in prices has been slow.
     BOJ economists are analyzing why consumer price moves have been weaker than
they expected in July, which has cast considerable doubt on achieving the 1.1%
rise that the board predicted for this fiscal year.
     "Judging from price moves so far and the outlook for prices, meeting the
1.1% rate forecast may be impossible," a person familiar with BOJ thinking said.
     The person added that the focus is now on how much to revise down the
median forecast from +1.1%.
     Another person familiar with BOJ thinking said that recent crude oil
prices, which are about $5 higher than the level seen in July, would limit the
downward revision.
     The person added that the output gap is moving in the right direction --
rising further into positive territory -- but consumer prices haven't been
sensitive to the improvement.
     The BOJ estimated the country's output gap to be +1.22% in the April-June
quarter, the third straight positive figure, rising from +0.75% in the first
quarter of 2017 and +0.45% in the final quarter of 2016.
     The BOJ expects the improvement in the output gap to eventually increase
upward pressure on consumer prices and inflation expectations, with a lag of a
few quarters.
     However, the recent improvement of the output gap hasn't been strong enough
to cause prices to accelerate significantly.
     September consumer price data will be released on Oct. 27, a few days
before the next BOJ policy-setting meeting. Even if prices accelerate in
September, the price data from April through August was weak enough to prompt
the board to lower its median forecast of +1.1%.
     The weaker inflation rate in the current fiscal year will also prompt the
board to lower slightly its median CPI forecast of +1.5% for fiscal 2018.
     Japan's core consumer price index (excluding fresh food) moved in a range
of +0.3% to 0.7% during the April-August period, or an average of +0.4%, far
below the BOJ's 1.1% forecast.
     Japan's core CPI would need to accelerate to 1.5% or higher for the rest of
the current fiscal year to March 2018 to achieve the 1.1% forecast, according to
the BOJ calculations.
     However, upward pressure from the past rise in crude oil prices on core CPI
will weaken gradually in the months ahead, while upward pressure from goods and
service prices, as well as wages, hasn't increased as much as the BOJ expected.
     In addition, the impact of the pass-through from the weaker yen to
downstream prices has been slower than BOJ economists predicted.
     BOJ officials are keeping a close eye on when the continued modest economic
expansion, resilient private consumption and tight labor market will have a
significant upward impact on consumer prices.
     BOJ economists are focused on the CPI excluding fresh food and energy (the
core-core CPI) to gauge the underlying trend of inflation.
     The core-core CPI moved in a range to 0.0% to 0.2% in the April to August
period, confirming the underlying price trend has shown only slow improvement.
     Both the core CPI and core-core CPI figures have also been somewhat weaker
than the BOJ board predicted at its July meeting.
--MNI Tokyo Bureau; tel: +81 90-2175-0040; email: hiroshi.inoue@marketnews.com
--MNI BEIJING Bureau; +1 202-371-2121; email: john.carter@mni-news.com
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