REPEAT: MNI: Japan Data Mixed, But BOJ Likely On Hold In April

Repeats Story Initially Transmitted at 06:35 GMT Mar 29/02:35 EST Mar 29

By Hiroshi Inoue

     TOKYO (MNI) - A slew of Japanese data Friday will have little impact on

Bank of Japan thinking ahead of the late-April policy meeting, with Tokyo

inflation data in line with expectations and industrial production numbers

narrowly beating forecasts although not recouping the damage done in previous

months, MNI understands.

     Bank officials were encouraged by the rebound in production, seen as a key

indicator of both domestic and external demand, but maintain their cautious

stance until a return to the previous trend is maintained. But for now, they

await April data to get a better feel for the overall state of the economy. 

     Policymakers will likely stand pat on monetary policy following the meeting

on April 24/25.

     February industrial production rose 1.4% on month following -3.4% in

January, -0.1% in December and -1.0% in November, according to preliminary data

released Friday by the Ministry of Economy, Trade and Industry, beating the MNI

median forecast of a 1.0% gain

     The March Tokyo core consumer price index excluding fresh foods rose 1.1%

on year in March for a 21st straight rise. It was unchanged from February's 1.1%

gain and in line with the MNI median forecast. The gain was driven largely by

the higher crude price contribution.

     --CAPEX KEY

     BOJ economists want to see if shipments of capital goods -- excluding

transportation equipment -- in demand for overseas capex rebound following

recent weakness.

     The expected drop in industrial production over Q1 following weak exports

is seen as a precursor to weak capital investment plans in fiscal 2019. The BOJ

awaits Monday's Tankan survey for an early look as they see capital investment

plans as a barometer to gauge the sustainability of the virtuous cycle from

profits to spending.

     If major manufacturer capital investment plans are weaker-than-historical

average, BOJ concern over a slowing recovery will gather pace, although they

will unlikely push for policy action before seeing revised data in June.

     --HIGHER GOODS PRICES

     The latest central Tokyo inflation rate, a lead indicator for the

nationwide data, will have little impact on their cautious price view as they

focus on how annual corporate price revisions expected next month boost consumer

price

     Many food and drink companies plan higher retail prices in April in the

wake of higher raw material and labour costs as its becoming more difficult to

resist higher costs through productivity.

     BOJ economists haven't yet gauged how planned price hikes affect the the

overall CPI and await to see how they impact consumers and corporate profits and

will study inflation expectations in a follow-up of the March Tankan business

sentiment survey due out on April 2.

     There were some bright spots for BOJ officials, as they are encouraged by

higher goods prices. The core-core CPI (excluding fresh food and energy) -- a

key indicator of the underlying trend -- rose 0.7% on year in March, unchanged

from February.

     The BOJ will release their medium-term economic growth and inflation

outlook through fiscal 2021 after a two-day policy-setting meeting and they are

expected to confirm ongoing price weakness will make it difficult for the BOJ to

achieve their 2% target in FY21.

--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