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Bank of Japan lowers inflation forecasts again
TOKYO, Jan 23, 2019 (BSS/AFP) – Japan’s central bank again revised down
its inflation forecasts on Wednesday, in the latest sign of its struggle to
reach a long-sought two percent rate that officials consider key to boost the
economy.
After a two-day meeting the policy board left its mammoth monetary easing
programme in place, as expected, and lowered the inflation forecast for the
fiscal year ending March next year to 0.9 percent from 1.4 percent.
It said the decision to revise down the forecast was “due primarily to the
decline in crude oil prices.”
The revision in its quarterly report follows a previous downgrade in late
October.
The BoJ in 2013 embarked on a huge bond-buying programme in a bid to
stimulate long-dormant prices with the stated aim of hitting two percent
inflation within two years.
But while the plan — which ran in tandem with Prime Minister Shinzo Abe’s
big-spending drive to ramp up the economy — showed early promise, the bank
has been forced to delay several times the date for hitting its target.
It has in the past blamed a “deflation mindset” caused by consumers and
employers used to long periods of low growth and deflation.
While it said Japan’s economy will likely continue to expand, it added that
“the mindset and behaviour based on the assumption that wages and prices will
not increase easily have been deeply entrenched”.
Officials have pointed to other factors including cautious wage and price
growth from firms, and increased technological progress that has reduced
costs and intensified competition.
“It has been taking time to resolve these factors that have been delaying
price rises,” the bank said.
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– Yen weakens –
The tepid inflation rate has meant the BoJ has had to maintain its easy
money policy, even as other central banks begin to tighten.
However, the safe haven status of the yen and growing global economic
uncertainty have helped the Japanese currency hold its strength against the
greenback. On Wednesday it was slightly down at 109.65 per dollar compared
with 109.37 Tuesday.
However, in the longer-term, firms will shift toward raising wages and
prices and the country’s inflation rate “is likely to increase gradually
toward two percent”, it insisted.
The bank also slightly lowered the inflation forecast for the current
fiscal year ending March 2019 to 0.8 percent from 0.9 percent, and reduced
the projection for the year ending March 2021 to 1.4 percent from 1.5
percent.
Those figures do not factor in the effects of a consumption tax hike
expected to go into effect in around October.
The BoJ also adjusted forecasts for year-on-year economic growth rate.
For the fiscal 2019 it revised up its growth projection to 0.9 percent from
0.8 percent, and for the fiscal 2020 it revised up the forecast to 1.0
percent from 0.8 percent.
The bank pointed to an array of downside risks for Japan’s growth including
“US macroeconomic policies and their impact on global financial markets”,
protectionism and Brexit.
BoJ governor Haruhiko Kuroda is scheduled to speak to media about the
latest policy decision later Wednesday.
BSS/AFP/HR/1130