BoJ board member Takako Masai reiterated in a speech that the baseline scenario is for that the economy is “likely to follow an improving trend with economic activity resuming and the impact of COVID-19 waning gradually”. Still “the pace is expected to be only moderate while vigilance against COVID-19 continues”. Thereafter, as the impact subsides globally, the economy is projected to “keep improving further with overseas economies returning to a steady growth path.”.
However, she had a cautious view on the outlook for two reasons. Firstly, growth in world trade volume had already been slowing since mid-2018, due to US-China trade friction. Japan’s export and production levels “had already been on a downtrend” prior to the pandemic. Secondly, global services sector had a growth presence in Japan’s labor market in recent years, but it’s projected to “recover at only a moderate pace”.
Additionally,l she pointed out the risks to outlook, including (1) the impact of COVID-19 on domestic and overseas economies; (2) firms’ and households’ medium- to long-term growth expectations; and (3) developments in the financial system. Additionally, attention should be paid to US-China tensions, Brexit, geopolitical risks and global financial markets developments.
