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BOJ may trim growth forecast, debate risks from China
July 14, 2015 / 9:03 PM / 2 years ago

BOJ may trim growth forecast, debate risks from China

* No policy change expected despite external risks
    * BOJ to roughly maintain rosy price forecasts
    * Governor Kuroda may warn of China slowdown
    * Policy decision seen 0230-0500 GMT
    * Kuroda to brief media 0630 GMT

    By Leika Kihara
    TOKYO, July 15 (Reuters) - The Bank of Japan may slightly
trim its economic growth forecast on Wednesday and debate risks
that cloud the prospect for hitting its ambitious inflation
target, including from sluggish shipments to China and
stubbornly weak household spending.
    With Chinese stock markets showing signs of stabilising 
after a month-long rout and Greece clinching a last-minute
conditional bailout, however, the central bank looks set to
stick to its upbeat price forecasts and hold off on offering
fresh stimulus, analysts say.
    BOJ Governor Haruhiko Kuroda is likely to reiterate his
optimism on the global outlook but may point to heightening
uncertainty over the bank's scenario that solid U.S. growth will
pull emerging economies out of the doldrums next year.
    "China is probably slowing more than the BOJ had expected,
delaying a pick-up in other emerging Asian nations," said Hideo
Kumano, chief economist at Dai-ichi Life Research Institute.
    "Risks from Greece may have receded for now. But risks from
sluggish Asian demand have not gone away."
    The BOJ is seen maintaining its pledge of expanding base
money at an annual pace of 80 trillion yen ($648 billion) via
aggressive asset purchases. It will also conduct a quarterly
review of its long-term forecasts.
    With the economy seen stalling in the second quarter on weak
exports, the BOJ may cut by 0.1-0.2 percentage point its
forecast of a 2.0 percent expansion in the current fiscal year
to March 2016, say sources familiar with its thinking.
    But the board is seen roughly maintaining its optimistic
price forecasts, they say, signalling that no immediate
expansion of stimulus was forthcoming. 
    Japan's economy likely entered a soft patch on weak exports
and household spending, though analysts expect growth to pick up
in July-September as rising wages lift consumption.
    While the BOJ expects robust U.S. demand to prop up growth
in Japan's Asian export markets, pessimists in the board fret
that shipments may remain soft for longer than expected given
China's economic woes and lacklustre global growth.
    The International Monetary Fund trimmed its global growth
forecast to take into account the impact of recent weakness in
the United States.
    The BOJ is confident a solid economic recovery will help
accelerate inflation to 2 percent by around September next year.
Many analysts doubt price growth will accelerate so quickly and
some predict additional stimulus to come later this year.
 ($1 = 123.4600 yen)

 (Editing by Shri Navaratnam)

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