Thursday, October 31, 2013
DJ: BOJ Sticks To Bullish Inflation Outlook In Semiannual Outlook Report
TOKYO--The Bank of Japan stuck to its bullish inflation outlook Thursday, suggesting the chance of monetary policy action in the near term is slim, even as private-sector professionals continue to see the central bank's price projection as unrealistic.
In their latest semiannual outlook report on growth and prices, the BOJ's nine policy board members stuck to their median forecast that core consumer prices will rise 1.9% in the Japanese fiscal year starting April 2015. That was unchanged from July, when the central bank held an interim review of its prediction. It slightly upgraded its outlook for inflation the current fiscal year ending in March and for growth for the subsequent fiscal year.
The price figure had attracted close attention because BOJ officials had said they would weigh additional easing measures if they began to feel unsure about whether they could meet their pledge to generate 2% inflation by around the middle of 2015.
Coming seven months after the central bank launched its aggressive monetary easing program to hit the price target, the outlook report underlines the BOJ's confidence in the policy program.
But a majority of private-sector economists say that after 15 years of deflation, there is a deeply embedded "deflationary mindset" among the Japanese, and that will cap Japan's inflation rate at 1% or so in fiscal 2015. They expect the BOJ will further loosen its policy next year, probably after the government raises the 5% sales tax to 8% in April 2014.
The inflation figure excludes the potential impact on prices from sales-tax increases.
The board members see the core CPI rising 0.7% in the ongoing fiscal year, higher than its previous forecast for a 0.6% increase. For the next fiscal year, the central bank expects the index to gain 1.3%.
The board members expect the economy will grow 2.7%, adjusted for price changes, in the current fiscal year, slightly down from the previous forecast of a 2.8% increase. But it raised its growth projection for the subsequent year to a 1.5% rise from a 1.3% increase, and kept unchanged its forecast for fiscal 2015 for a 1.5% gain.
Earlier in the day, the policy board decided unanimously maintain its policy of increasing the monetary base at an annual pace of Y60 trillion-Y70 trillion -- its new policy target -- to double the amount of the money the central bank supplies for the economy by March 2015.
The BOJ issues the outlook report each April and October, with interim reviews in January and July.