Global gloom could force Japanese central bank to temper prospects

TOKYO (Reuters) – The Bank of Japan will no doubt wait for its monetary policy on Friday, but is optimistic that strong exports and manufacturing output will support growth, a sign of heightened risk to the economy. Foreigners who risk compromising a fragile economic recovery.

Factories around the world slammed the brakes last month, as demand was affected by the US-China trade war, slowing global growth and political uncertainty in Europe before the departure of the Great Britain. -Brittany of the European Union.

These weak signs forced the major central banks to suspend rising interest rates and cast doubt on the BoJ's repeated badessment that foreign economies "continue to grow steadily".

Many BoJ members expect the Japanese economy to come out of the difficult period in the second half of this year, as Beijing's stimulus packages could boost Chinese demand and support global growth, said sources at Reuters.

But there is uncertainty about how quickly global demand could rebound, adding to the plight of Japanese companies that are already feeling the effects of softening Chinese demand, badysts said.

"The BOJ will probably not change its view that the economy is keeping up momentum to reach its price target. But she is probably aware of the increased risks to the price outlook, "said Mari Iwashita, chief market economist at Daiwa Securities.

"If the economy and prices prove to be weak, the BOJ could be forced to recognize that the momentum is shrinking and thinking about further monetary easing," she said.

After a two-day rate review ending on Friday, the Bank of Russia should commit to keeping short-term interest rates below 0.1% and 10-year government bond yields around zero percent.

According to the same source, the Bank of Japan estimates that Japan's economy "continues to grow moderately", which could slightly change the wording to reflect the increase in external risks.

Given the heightened risk, the Bank of Russia may also offer a darker view of exports and production from its current badessment, which indicates that they are "increasing according to trend".

The BOJ faces a dilemma. Years of printing large sums of money have dried up the liquidity of the market and hurt the profits of commercial banks, raising concern over the growing risks of prolonged laxity.

And yet controlled inflation has left the BOJ far behind the other major central banks in crisis policy, leaving it with little ammunition to face the next recession.

The nine-member board is divided between those who believe stimulus can be revived and those who are more wary of the rising cost of prolonged easing.

But the central bank's range of monetary policy instruments means that the obstacle to further easing remains high, badysts say.

The greatest concern of BOJ policymakers is that the weakening of exports and production will undermine business confidence, prompting them to delay capital spending and wage increases.

The markets are therefore focusing on the BOJ's quarterly "tankan" survey on the business climate, to be released on April 1, to see if further easing could be considered, badysts said.