Goushi Kataoka: Economic activity, prices, and monetary policy in Japan

Speech by Mr Goushi Kataoka, Member of the Policy Board of the Bank of Japan, at a meeting with business leaders, Hakodate, 4 September 2019.

The views expressed in this speech are those of the speaker and not the view of the BIS.

I. Economic Activity and Prices

A. Overseas Economies

I would like to start my speech by looking at developments in overseas economies.

With the growth pace of the global economy slowing since the second half of 2018, differences in growth rates among countries are evident, and some risk factors have started to materialize. According to the July 2019 World Economic Outlook (WEO) Update released by the International Monetary Fund (IMF), as presented in Chart 1, the global economic growth rate is projected to decelerate to 3.2 percent in 2019, picking up to 3.5 percent in 2020. However, downward revisions from the April 2018 WEO forecasts are evident, as seen on the right-hand side of Chart 1. As for the global Purchasing Managers' Index (PMI), shown in Chart 2, the index for manufacturing has been below the neutral 50-point level for two consecutive months, marking the lowest level since October 2012, when the global economy faced the European sovereign debt crisis. The index for services is on a moderate declining trend, although it is still above the 50-point level. Given these facts, I suppose there is a growing possibility that the recovery in the global economy, which was expected to start from the second half of 2019, may be delayed, and the degree may be limited. There are three specific key factors behind my thoughts: (1) the heightening of economic policy uncertainty; (2) developments in the U.S.-China trade friction and their effects; and (3) the outlook for the world semiconductor market.