REPEAT: MNI: New BOJ Capex Data Due With Jan Outlook Report

Repeats Story Initially Transmitted at 13:10 GMT Nov 22/08:10 EST Nov 22

--BOJ's "Capital Investment Function" To Outline Future Capex Investment

By Hiroshi Inoue

     TOKYO (MNI) - The Bank of Japan will likely introduce a new data set

alongside the January Outlook Report to try and gauge the level of corporate

capital investment going forward, MNI understands.

     The BOJ's so-called "capital investment function" will focus on corporate

profits, the expected economic growth rate and potential economic growth rate to

judge how much capital investment will be implemented and to examine how it

deviates from the long-term averages, indicating cyclical adjustments.

     --CAPEX TO DECELERATE

     The new data will show the pace of capital investment is likely to

decelerate in or after fiscal 2019, as pressure stemming from a cyclical

adjustment in capital stock heightens. The BOJ board has incorporated the

expected slowdown into its median forecast for real GDP in fiscal 2019 and

fiscal 2020, both forecast for growth of 0.8%, slowing from 1.4% in the current

fiscal year.

     According to the BOJ, "The nominal investment-GDP ratio is expected to

maintain its high level but the ratio has reached the peak levels observed in

the investment cycles after the burst of the asset bubble."

     Capital investment is now likely to see a gradual deceleration in growth

through the end of the FY2020 projection period, as pressure stemming from

cyclical adjustments in capital stock heightens, the BOJ said.

     --EXPECTS SOLID EXPORTS

     Despite slowing capital investment, the BOJ expects the economy to

decelerate but to continue growing, partly supported by external demand.

"Exports are expected to maintain their increasing trend on the back of overseas

economies continuing to grow firmly on the whole," the BOJ has said.

     Despite growing uncertainty over global growth as the trade dispute lingers

and China's economy slows, BOJ officials don't see a need to change the baseline

recovery scenario of overseas economies and Japan's exports.

     --IMF LOWERS GDP

     In October, the International Monetary Fund lowered the forecast for global

growth to 3.7% for both 2018 and 2019 from the 3.9% rates reported in the April

and July WEO releases.

     The IMF noted, "the balance of risks to the short-term global growth

forecasts has now shifted to the downside" and that the chance of an upside

surprise has diminished.

     However, 3.7% growth is still above the past average growth rate and unless

the global economy is hit by large shock, Japan's exports will continue to pick

up, supporting economic growth.

     If the global economy decelerates on the back of the continued trade

dispute, Japan's exports will slow and downside risk to Japan's economy would

increase, which in turn will prompt the BOJ to further lower their GDP forecast.

     Private consumption, another pillar of domestic demand, will not replace

capital investment, as consumption will likely be weighed ahead due to the

impact of the government's sales tax hike planned in October 2019.

--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