BOJ: Japan Q1 Output Gap +0.79%; 3rd Straight Positive Figure: MNI

TOKYO (MNI) – The Bank of Japan on Wednesday estimated the country’s output gap to be +0.79% in the January-March quarter, the third straight positive figure following +0.57% in the fourth quarter of 2016 and +0.07% in the third quarter.

The positive output gap in the third quarter of 2016 was the first positive figure since the first quarter of 2015, when it was +0.13%.

The improvement in the output gap is expected to increase the upward pressure on consumer prices and inflation expectations, with a lag of three to four quarters.

The BOJ had said in its semi-annual Outlook Report released in April, “the output gap is expected to widen further within positive territory.”

The BOJ’s estimate of the gap between oversupply and slack demand, which is based on capital and labor stocks, was higher than the Cabinet Office’s estimate of +0.1%, a figure based on revised first-quarter gross domestic product data.

The latest data showed that real gross domestic product for the first quarter was revised down to +0.3% on quarter, or an annualized +1.0%, from the preliminary estimate of +0.5% on quarter, or an annualized 2.2%.

The downward revision came from domestic demand, which was revised down to a +0.1 percentage point contribution from a preliminary +0.4 percentage point. The contribution of net exports — exports minus imports — was unrevised at +0.1 percentage point.

The fifth straight quarterly expansion in GDP followed a 0.3% rise on quarter, or an annualized 1.4% increase, in October-December. It was above the potential growth rate estimated somewhere between 0.5% and 1%.

The BOJ also said that Japan’s potential growth rate in the October 2016 to March 2017 period was estimated to be 0.75%, improving from 0.71% for the April-September 2016 period. The latest estimate was within the BOJ’s predicted range of 0.5% to 1.0%.

The Cabinet Office estimated Japan’s potential growth rate to be about 0.8% in the January-March quarter, unchanged from that for the previous quarter.

–MNI Tokyo Bureau; tel: +81 90-2175-0040; email:
–MNI Beijing Bureau; +86 (10) 8532-5998; email:

Source: MNI

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