Bank of Japan officials are concerned that cooler-than-normal weather triggered by El Nino will curb spending this summer and weigh on an economic rebound after April's sales tax increase, according to people familiar with the matter.
Bank officials are watching for potential weakening in consumer spending and sentiment that could add to other risks facing the economy, such as weak exports and political developments in Ukraine, according to the sources, who asked not to be named because the discussions were private. With an export recovery that could be gradual, the effects of El Nino require close monitoring, they said.
The Meteorological Agency this week forecast a 70 percent chance that El Nino will occur, the highest since its last occurrence in 2009, bringing lower temperatures that could continue through autumn. Dai-ichi Life Research Institute economist Toshihiro Nagahama sees a risk that cooler weather could reduce growth by as much as 0.9 points in the third quarter.