Notes from Private Briefing with BOJ

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The BOJ's rep office in NY invited a number of analysts to meet the Deputy Director of the stats office and hear a presentation about the economic impact from the recent disaster.

The key take away points from the BOJ is that disaster may not be as costly, but it will take a quite a while to fully recover. Specifically the govern initial estimate is JPY16-JPY25 trillion (~$200-$300 bln). The damages to the plants in the stricken area may cut the country's output by 0.2-0.4%. This was regarded as a preliminary figure and does not include the impact of the electricity shortage. This number is more likely to be revised down to show a larger GDP impact.

The electrical output problem seems to be the key to the longer-term impact. The eastern and western parts of the country use different systems and are nut fungible. This and the disruption to supply chains are the main sources of secondary impact and will take at least a couple of years to replace. The supply chains are impacted not just by the shortage of electricity but by disruptions in the transportation infrastructure.

In terms of financing the reconstruction and rebuilding efforts, officials played down the market speculation of reconstruction bonds and tax increases. Political considerations seemed paramount.

The liability of non-life insurance companies is estimated around $7 bln (JPY0.6 trillion). The BOJ does not expect them to sell overseas assets to fund these liabilities, but more likely to sell JGBs.

In terms of data, the BOJ explained why data for the next several months are likely to be skewed and not providing a clean read on the economy. The official also played down the two Tankan reports recently released as well suggesting sample distortions. In any event, officials seemed to suggest the June Tankan will be given greater weighting.

There was no discussion of the yen's outlook or Japanese interest rate outlook.