BOJ policymaker warns of uncertain recovery, bases hopes on pent-up demand

TOKYO, Aug. 25 (Reuters) – Toyoaki Nakamura, a board member of the Bank of Japan, warned of the risks to the economic outlook from a recent resurgence in COVID-19 infections, but expressed the hope that consumption will increase once households feel secure to start spending.

Nakamura said the world’s third-largest economy is expected to rebound as the impact of the pandemic wears off, underscoring the growth boost given by robust global demand and a pick-up in capital spending.

The outlook was “very uncertain” with downward biased risks, the former company executive said, as the state of emergency to tackle the pandemic hurt retailers.

But Nakamura expressed hope that once the vaccinations are completed, consumption could be boosted by pent-up demand, with Japanese households charging a record 1,056 billion yen ($ 9.61 billion) in cash and cash. deposits.

“The resurgence of infections may have delayed somewhat the time when pent-up demand materializes,” he said in a speech on Wednesday, adding that there was a chance that economic activity would strengthen more than expected once the impact of the pandemic subsides.

Japan is seeking to extend the state of emergency to eight more prefectures, bringing the total to 21 in total, to stem a rapid rise in coronavirus infections, the minister responsible for COVID-19 countermeasures said on Wednesday. Read more

Japan’s economy rebounded more than expected in the second quarter after collapsing in the first three months of this year, a sign that consumption and capital spending were recovering from the initial blow from the coronavirus pandemic. Read more

But many analysts expect growth to remain subdued in the current quarter as restrictions reimposed to tackle a spike in infections weigh on household spending.

($ 1 = 109.8300 yen)

Reporting by Leika Kihara; Additional reporting by Kantaro Komiya; Editing by Chang-Ran Kim and Jacqueline Wong

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