Bank of Japan hikes inflation forecast on soaring energy prices, Japan’s central ba’nk ” Bank of Japan ” hiked its full-year
inflation forecast on Thursday but cautioned that it sees rising prices,
driven by a surge in commodity costs cause by the Ukraine war, as a volatile
and temporary trend.
Bank of Japan hikes inflation forecast on soaring energy prices
Despite climbing prices and a slump in the yen to a 20-year low against
the dollar, the bank of Japan left its ultra-loose monetary policy unchanged.
The ba’nk revised upwards its inflation projection for the 2022-23
financial year to 1.9 percent — sharply up from its previous 1.1 percent
The figure, which excludes fresh food, is just below the ba’nk’s
longstanding two-percent target but the BoJ saw the rises as unsustainable
and is calling for continued effort to achieve a sustainable cycle of dynamic
Consumer-prices are “likely to increase temporarily to around two percent
— due to the impact of a significant rise in energy prices — in fiscal
2022”, it said Thursday.
“However, the rate of increase is expected to decelerate, because the
positive contribution of the rise in energy prices to the CPI (consumer price
index) is likely to wane.”
In March, core Consumer-prices rose 0.8 percent — the fastest increase in
more than two years — as oil prices soared.
Excluding energy, however, prices were down 0.7 percent, reflecting what
the ba’nk says is the need for continued effort to achieve a sustainable cycle
of dynamic economic growth that stimulates demand.
On Thursday, the ba’nk’s policymakers left their inflation forecast for
2023-24 unchanged at 1.1 percent.
The BoJ said it now expects the economy to grow 2.9 percent in the current
fiscal year, against its previous forecast of 3.8 percent. But it also
predicted 1.9 percent expansion in 2023-24, from its previous projection of
The changes were down to factors including “a resurgence of Covid-19, the
rise in commodity prices and a slowdown in overseas economies”, the ba’nk
The two-day BoJ meeting that ended Thursday comes with the yen at its
weakest level against the dollar since 2002 because of the widening gap
between Japan’s loose monetary policy and the US Federal Reserve’s
increasingly hawkish tilt.
The bank has suggested that the benefits of a weaker yen, particularly for
major Japanese exporters, outweigh the disadvantages, but this messaging has
become more difficult to sustain in the face of growing concern.
A weaker yen is particularly problematic for resource-poor Japan, which
relies on energy imports, and in recent weeks politicians have expressed
concern about the speed of the currency’s slump.
But no intervention appears on the horizon, though Prime Minister Fumio
Kishida’s government this week unveiled a new economic package including cash
handouts for low-income families and an expansion of fuel subsidies to
cushion the impact of rising prices.