Bank of Japan might revise up inflation outlook for fiscal 2022

Jiji Press

11:16 JST, April 21, 2022

TOKYO (Jiji Press) — The Bank of Japan is expected to consider revising up its inflation forecast for fiscal 2022 in a quarterly report to be adopted at its monetary policy meeting on April 27-28.

The BOJ’s growth projection for Japan’s core consumer price index for the year to March 2023 may be revised to between 1.5% and 1.9% from the 1.1% forecast in the central bank’s previous Outlook for Economic Activity and Prices report in January, informed sources said.

The possible upward revision will be due to higher import prices resulting from the yen’s recent rapid weakening, as well as surging crude oil prices.

At the two-day meeting, members of the BOJ’s Policy Board are seen discussing the impact of the weak yen on the Japanese economy and domestic prices, according to the sources. BOJ Gov. Haruhiko Kuroda has shown a sense of caution, saying, “We also need to keep in mind that [the yen’s decline] could adversely affect [the Japanese economy].”

The BOJ is expected to keep its current massive monetary easing unchanged.

For the time being, the CPI is widely projected to post year-on-year rises of about 2%, the BOJ’s inflation target, reflecting higher gasoline and food prices. Also, the effects on the CPI from cuts in mobile phone fees last year are expected to wear off from now.

Still, a senior BOJ official said, “The price increases will be temporary.”

The BOJ’s CPI growth projection for fiscal 2024, to be newly shown in the upcoming outlook report, is unlikely to reach 2%.

Meanwhile, the BOJ’s real growth forecast for the country’s gross domestic product for fiscal 2022 is highly likely to be revised down slightly from the 3.8% projected in the January report, due to parts shortages caused by supply constraints and cost increases stemming from higher prices.