Daily Management Review

Next Fiscal Year's Growth & Price Estimates for Japan Likely To Be Cut By Central Bank: Reuters


03/07/2016




Next Fiscal Year's Growth & Price Estimates for Japan Likely To Be Cut By Central Bank: Reuters
As a weak global demand hits growth and yen rises weigh on imported fuel costs, sources close to Japan’s central bank and people familiar with its thinking say that the bank is expected to cut its economic and price forecasts for next fiscal year at a quarterly review in April.
  
Less than a couple of months ago the Bank of Japan (BOJ) underscored the fragile nature of Japan's economic recovery and attempted to forestall risks of an economic downturn by adopting negative interest rates. The most recent assessment of the bank about the future comes close on the heels of that measure.
 
A bleaker view on exports, output and the economy could be offered by board the Bank of Japan compared to what the bank gave in January which would be prompted  a change in the Bank of Japan's baseline expectations for the fiscal year ending March 2017. The board of the bank is scheduled to meet soon.
  
Some of the Bank of Japan’s officials fret the global market turbulence and sluggish emerging market demand are taking a heavier than expected toll on exports and factory output even as many officials remain optimistic about domestic demand.
 
"Risks are clearly tilted toward the downside both in terms of the economy and prices," Reuters reported quoting one of the sources, a view echoed by two other officials familiar with the BOJ's thinking.
  
The bank's baseline expectation of a moderate economic recovery could come under threat if market turbulence persists, warned pessimists in the bank.
 
The sources said that the board members may also cut their growth and price projections at a quarterly review to be conducted at a more critical policy meeting on April 27-28 thus reflecting weak external demand.
 
The sources said that the cost of imported goods and fuel would be pushed down by a rise in the yen, which is now around 115 to the dollar compared with 120 in January. This rise would weigh also down on inflation.
 
The Bank of Japan expects the core consumer inflation to hit 0.8 percent and the economy to expand 1.5 percent in the coming year beginning in April as was declared by the bank in its forecast made in January.
 
A slight contraction - slightly more than initially estimated in the final quarter of 2015, in Japan’s economy is expected in the revised GDP data due to be out Tuesday. Experts are of the opinion that this would also keep the central bank under pressure to deploy additional monetary stimulus.
 
Dispelling speculation of immediate easing, the Bank of Japan’s Governor Haruhiko Kuroda said on Monday that now was the time to scrutinize the effect of the January easing on the economy and maintained his optimism on Japan's economic recovery.
 
While output was moving sideways, exports were picking up albeit with some weaknesses, the central bank in Japan had said about the country’s economy and added that Japan's economy continues to recover moderately.
 
(Source:www.reuters.com) 






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