The Bank of Japan is likely to adopt an inflation forecast of around 2 percent for fiscal 2020 that excludes the impact of the consumption tax hike planned for October 2019, it has been learned.
The projection will be included in the central bank’s quarterly Outlook for Economic Activity and Prices report to be released after its April 26 to 27 meeting on monetary policy, informed sources said Friday.
The meeting will be the first since Gov. Haruhiko Kuroda started his new five-year term Monday. The Policy Board is expected to keep its massive monetary easing policy in place.
In the forthcoming report, the BOJ will maintain the view that prices will continue its uptrend amid solid domestic and overseas economies, the sources said.
The central bank is also expected to keep its forecast that inflation will reach its target of 2 percent “around fiscal 2019” unchanged.
The bank appears unlikely to substantially change its fiscal 2019 inflation estimate in terms of the core consumer price index from the current 1.8 percent, excluding the impact of the tax hike.
It will also disclose its first projection for fiscal 2020.
In February, Japan’s core CPI, which excludes prices for fresh food but not energy, rose 1.0 percent — the fastest pace in 3½ years. But a narrower but more internationally popular index that excludes energy prices grew at a slower pace of 0.5 percent. Japan must use imports to supply nearly all of its energy needs.
There are concerns that inflation could slow if a stronger yen weighs on import prices.
But the BOJ is sticking to a scenario in which inflation will gain momentum toward the 2 percent target as the supply-demand balance continues to tighten in Japan.
At a meeting of the BOJ’s regional branch managers Thursday, participants reported that moves to increase prices to cover rising personnel costs caused by the national labor shortage are gradually spreading among companies.