UPDATE: MNI: BOJ: Japan Q1 Output Gap +1.71 Pt Vs Q4 +1.57 Pt

     TOKYO (MNI) - The Bank of Japan said Wednesday it estimates that the

positive output gap resulting from tighter supply and firmer demand widened to

1.71 percentage points in the January-March quarter from 1.57% points in

October-December 2017.

     It was the sixth straight quarter of the gap being in positive territory,

improving from 0.80% points in January-March 2017.

     The improvement in the output gap is expected to increase upward pressure

on consumer prices and inflation expectations with a lag of a few quarters.

     The BOJ's estimate of the output gap, which is based on capital and labor

stocks, was wider than the Cabinet Office's latest estimate at 0.3% percentage

point, a figure based on revised Q1 GDP growth of -0.2% on quarter, or an

annualized -0.6%, and down from 0.7% point for the October-December period.

     The BOJ also said Wednesday that Japan's potential growth rate for a

six-month period from October 2017 to March 2018 was estimated to be 0.85%,

unchanged from 0.85% for April-September 2017. It was within the bank's latest

estimate in a range of 0.5% to 1.0% which was provided in the April Outlook

Report.

     The Cabinet Office estimates Japan's potential growth rate to be about 1.0%

in the January-March quarter, unchanged from the previous three months.

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