Bank of Japan cuts inflation forecast, maintains stimulus

Photo: Oli Scarff/Getty Images

The Bank of Japan has lowered its inflation forecast for the year, indicating an unwind of the unprecedented monetary easing remains distant.

The BOJ, which has an inflation target of 2%, cut its inflation projection for fiscal 2017 to 1.4% from 1.5%. However, it maintained it aims to achieve its price target by next year. It nudged up up its growth expectations for the year and said it will continue to use its two policy rates and asset purchases to spur price growth.

The inflation forecast cut underscores the BOJ’s struggle to boost prices after four years of stimulus. It also comes as the US Federal Reserve is increasing interest rates and European Central Bank officials, who meet later Thursday, have started discussing the stimulus program taper.

The BOJ will continue with its stimulus to “achieve the price stability target of 2% as long as it is necessary for maintaining that target in a stable manner,” it said.

This table shows the range of estimates for economic growth and inflation of the nine board members. They are the median estimates of the nine board members. The inflation forecasts exclude the effect of the planned sales tax increase in fiscal 2019.

Rising oil prices and a relatively weaker Japanese yen may spur consumer prices and pave the way for a tightening.

Oil prices have recovered to around US$50 a barrel from a low of US$30 a barrel in early 2016 on the back of cuts by producers headed by Organisation of Petroleum Exporting Countries and Russia late last year. The Japan yen traded at 111.23 per US dollar Thursday down from the 100 mark in June last year.

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