Japan's March factory output to shrink, BOJ seen keeping policy unchanged - Reuters poll

TOKYO (Reuters) - Japan's March factory output is forecast to have slipped for the first time in two months, a Reuters poll showed on Friday, though the central bank is expected to stand pat on policy as it bets on a gradual economic recovery despite rising risks to growth.

The poll of 17 economists predicted the Bank of Japan will retain its massive stimulus as well as the short-term interest rate target at minus 0.1 percent, while also maintaining its pledge to guide 10-year government bond yields around zero percent at its April 24-25 meeting.

The BOJ is facing a daunting task in its years-long efforts to help push up inflation towards its 2 percent goal, with a slowdown in global growth and trade making its task even more difficult.

Factories have been under strain in the past few months, and the poll forecast industrial production to have slipped 0.1 percent in March from the previous month after it rose 0.7 percent in February.

"Exports are weakening due to the global economic slowdown, which appears to have impacted on factory output," said Yoshiki Shinke, chief economist at Dai-Ichi Life Research Institute.

"The economy is either at a temporarily lull or worsening slightly. But it requires more data to assess whether the economy contracted in the first quarter."

The trade ministry will publish the factory output at 8:50 a.m. April 26, Japan time (2350 GMT April 25).

Data on the nation's retail sector, due at the same time with the factory output numbers, is projected to show sales rising 0.8 percent last month from a year earlier, the poll found, accelerating from a 0.4 percent increase in February.

Recent gains in oil prices appear to have supported fuel retailers and demand from inbound tourists likely also boosted the overall retail sales, analysts said.

Yet the positive retail impulse would need to be sustained for some months to help boost inflation and overall consumption.

Indeed, the BOJ is expected to forecast next week that inflation will remain below its 2 percent target through the fiscal year that ends in March 2022, sources say.

The central bank is also seen sticking to its view that Japan's economy will emerge from a soft patch and resume a moderate expansion in the second half of 2019. [nL3N220509]

"We forecast the BOJ won't largely change its economic view, so the central bank will likely keep its current pace of stimulus policy," said Shuji Tonouchi, senior market economist at Mitsubishi UFJ Morgan Stanley Securities.

The poll also found Tokyo's core consumer prices (CPI) index, which includes oil products but excludes fresh food prices, rose 1.1 percent in April from a year earlier, the same pace as in March.

Price gains in oil related products probably contributed to Tokyo's core CPI, while falls in costs of electricity and city gas weighed on the index, analysts said.

The poll showed the jobless rate pushed up to 2.4 percent in March from 2.3 percent in February, and the jobs-to-applicants ratio improved to 1.64, which would be an over 40-year high, from 1.63 in February.

The government will publish Tokyo's core CPI and jobs data at 8:30 a.m. on April 26 (2330 GMT on April 25).

(Reporting by Kaori Kaneko; Editing by Shri Navaratnam)