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JAPAN-ECONOMY-BOJ-INFLATION-FINANCE
Bank of Japan lowers inflation forecasts again
TOKYO, Oct 31, 2018 (BSS/AFP) – Japan’s central bank revised down
inflation forecasts again on Wednesday, in the latest sign that it has made
little headway towards its 2.0 percent target despite years of massive
monetary easing.
The Bank of Japan left that easing programme in place, as expected, and
slightly lowered the inflation forecast for the fiscal year ending March 2019
to 0.9 percent from 1.1 percent.
The revision, in a quarterly report issued after a two-day meeting of the
central bank, comes after it earlier this year dropped a 2020 target for the
long-standing 2.0 percent goal.
“The momentum toward achieving the price stability target of 2.0 percent
is maintained but is not yet sufficiently firm,” the BoJ said in the report.
It also revised down forecasts for the coming years, projecting a 1.4
percent rate for fiscal 2019 and 1.5 percent for fiscal 2020.
Those figures don’t factor in the effects of a consumption tax hike
expected to go into effect around October 2019.
The BoJ has struggled for years to reach the 2.0 inflation rate thought
necessary to turbocharge Japan’s economy, and has defended its decision to
maintain its monetary easing even as other central banks tighten policy.
It blames a “deflation mindset” caused by consumers and employers used to
long periods of low growth and deflation.
In its report it said companies remained “cautious” when setting prices
and wages, with households similarly careful on spending.
The bank has been criticised for the consequences of its policy, including
concerns that its massive purchases are skewing the bond market and financial
markets.
In a nod to those concerns, it said in July it would seek to keep yields
on benchmark 10-year government bonds around zero percent.
But there are no expectations that it will follow the lead of the US
Federal Reserve and European Central Bank and move towards tightening.
In September, BoJ chief Haruhiko Kuroda said the bank had no plans to
raise long-term interest rates “for quite a long time.”
“We don’t specify the period, such as whether it is one year, three years
or five years,” he told the Yomiuri Shimbun newspaper.
“It’s a commitment that we will maintain the current low levels (of rates)
as long as uncertainty lingers.”
BSS/AFP/HR/1215