BOJ raises inflation forecasts, maintains ultra-easy policy

  • Economy
  • Tuesday, 18 Jan 2022

TOKYO: The Bank of Japan upgraded its inflation forecasts on Tuesday and said risks to the price outlook were evenly balanced, in a nod to signs the recent commodity-driven rise in inflation was broadening.

But with inflation set to remain below its 2% target in the coming years, the BOJ stressed its resolve to maintain its ultra-loose monetary policy even as its global counterparts move toward exiting from crisis-mode policies.

As widely expected, the BOJ left unchanged a -0.1% target for short-term interest rates and a pledge to guide long-term rates around 0% at a two-day meeting that ended on Tuesday.

In a quarterly outlook report, the BOJ revised up its inflation forecast for the year beginning in April to a 1.1% increase from the previous estimate of a 0.9% increase.

It also slightly raised its inflation forecast for fiscal 2023 to 1.1% from 1.0%.

"Risks to prices are generally balanced," the BOJ said in the report. That compared with its assessment in October, which said risks to the price outlook were skewed to the downside.

Markets are focused on BOJ Governor Haruhiko Kuroda's comments at a post-meeting briefing for clues on how rising price pressures could affect the central bank's policy outlook.

Inflation is creeping up towards the BOJ's target not because the economy is gaining traction but because of external factors, complicating matters for policymakers trying to explain how the recent price moves could affect future monetary policy.

A spike in wholesale inflation and rising import costs from a weak yen have led to price hikes for a broad range of goods, hitting households at a time wage growth remains slow.

Some analysts expect core consumer inflation to exceed 1.5% around April, as the drag from last year's cellphone fee cuts taper off and past rises in oil costs push up electricity bills.

With the rise driven by higher raw material prices, rather than a hoped-for uptick in domestic demand, the BOJ's near-term priority is to avoid a transitory blip in inflation from fuelling market speculation of an early policy tightening.

Discounting rising price pressures too much, however, could dampen public perceptions of future price gains and derail the BOJ's efforts to fire up inflation to its target, analysts say. - Reuters
Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 1
Cxense type: free
User access status: 3
Join our Telegram channel to get our Evening Alerts and breaking news highlights

Bank of Japan , interest rate , inflation


Next In Business News

Ringgit seen trading range-bound at RM4.38-RM4.40 against US dollar next week
CPO futures on cautious tone next week
PetChem finds good fit in Sweden’s Perstorp
Short Position - CPO prices, Green hydrogen in Malaysia
Chin Hin Group continues M&A spree
Recovery theme sustains short-term interest in M-REITs
New vehicle sales down 3.6% in April
Khazanah in S. Korean partnership with SK ecoplant
Higher palm oil price boost for Sime Darby
Pharmaniaga’s quarterly revenue rises 21.26%

Others Also Read