Global Gloom May Force Japan Central Bank To Temper Its Outlook | 1/23/2019 | Staff
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TOKYO (Reuters) – The Bank of Japan is likely to stand pat on monetary policy on Friday but temper its optimism that robust exports and factory output will underpin growth, a nod to heightened overseas risks that threaten to derail a fragile economic recovery.

Factories across the globe slammed on the brakes last month as demand was hit by the U.S.-China trade war, slowing global growth and political uncertainty in Europe ahead of Britain’s departure from the European Union.

Signs - Banks - Interest - Rates - Doubt

Such weak signs have forced major central banks to pause in raising interest rates and cast doubt on the BOJ’s repeatedly-stated assessment that overseas economies “continue to grow steadily”.

Many in the BOJ expect Japan’s economy to emerge from the current soft patch in the second half of this year, when Beijing’s stimulus plans could lift Chinese demand and underpin global growth, sources have told Reuters.

Uncertainty - Demand - Woes - Companies - Pinch

But there is uncertainty on how quickly global demand could rebound, adding to woes for Japanese companies already feeling the pinch from slowing Chinese demand, analysts say.

“The BOJ likely won’t change its view that the economy is sustaining momentum to achieve its price target. But it’s probably aware of heightening risks to the price outlook,” said Mari Iwashita, chief market economist at Daiwa Securities.

Economy - Prices - BOJ - Momentum - Easing

“If both the economy and prices prove to be weak, the BOJ may be forced to concede that the momentum is diminishing and ponder additional monetary easing,” she said.

At a two-day rate review ending on Friday, the BOJ is widely expected to maintain a pledge to guide short-term interest rates at minus 0.1 percent and 10-year government bond yields around zero percent.

BOJ - Assessment

While the BOJ is seen sticking to its assessment that...
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