Weak data to test BOJ's rosy economic view, policy on hold

While the BOJ is likely to stick to its assessment that the economy is recovering moderately, pessimists on the board may propose offering a bleaker view on components such as factory output, say sources familiar with the bank's thinking. "It's pretty clear from data out so far that the economy is undershooting the BOJ's forecast," said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute. The BOJ cut its assessment on exports earlier this month to say they were "weakening" but left intact its view that factory output, while also weakening, continues to "rise as a trend". Household spending fell more than expected in July and analysts expect bad weather and lasting effects from the tax hike to weigh on consumption in coming months, casting doubt on the BOJ's view that domestic demand remains firm.

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