BOJ to revise down forecast for inflation

The Yomiuri ShimbunThe Bank of Japan is preparing to revise downward its inflation forecast for fiscal 2017, it has been learned.

Wages have risen due to a labor shortage brought about by the economic recovery. However, many companies remain reluctant to hike prices as consumers continue to spend at low levels.

The central bank will likely lower its April forecast of 1.4 percent to somewhere from 1 percent to 1.4 percent, sources said.

The bank will include the latest inflation forecast in its Outlook for Economic Activity and Prices report, which will be released following its Monetary Policy Meeting scheduled for next Wednesday and Thursday.

The year-on-year change to consumer prices, excluding fresh foods that are subject to large price fluctuations, remained at 0.4 percent for May. Prices are unlikely to increase going forward with the rise in crude oil prices grinding to a halt.

Most of the nine members of the bank’s Policy Board, which includes the governor and two deputy governors, who vote in the policy meeting are inclined to judge that while the underlying trend toward price increases remains unchanged, it will take time for prices to rise significantly.

Movement of such a nature made it very difficult to reach the inflation target of 2 percent by April 2018, when Gov. Haruhiko Kuroda’s term expires.

The central bank remains bullish on the Japanese economy’s prospects. Automobile and electronic part exports are solid, and the bank believes personal consumption remains steady. It may revise upward its June economic assessment, which stated, “Japan’s economy has been moving towards a moderate expansion.”Speech

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