• Kyodo


The Bank of Japan began a two-day policy meeting Monday and was widely expected to keep its ultraeasy monetary policy in place and upgrade its growth outlook for the next fiscal year.

The central bank has been facing an uphill battle in hitting its 2 percent inflation target. In the outlook report, the BOJ will likely continue to forecast that hitting the goal will remain elusive in the coming years.

Last week, BOJ Gov. Haruhiko Kuroda repeated his commitment at a meeting of BOJ branch managers to take additional easing measures if momentum toward the 2 percent goal weakens.

In a report released after that meeting, the BOJ downgraded its assessments for a third of Japan’s nine regional economies, citing slowdowns in exports and production caused by weak demand overseas. Some regions reported weaker consumption after the Oct. 1 consumption tax hike to 10 percent from 8 percent.

But the BOJ is expected to keep interest rates unchanged and continue with its asset-buying program, standing pat on robust a Tokyo stock market recently lifted by the respite caused by the “phase one” agreement signed in the nearly two-year U.S.-China trade war.

It will also likely hold off from cutting rates further, given the yen’s recent stability against the dollar after the U.S. Federal Reserve last year hinted at pausing its rate reduction scheduled after three consecutive cuts. A narrower interest rate gap between the United States and Japan could trigger an unwanted surge in the yen.

On Japan’s economy, the BOJ is almost set to raise its growth forecast for fiscal 2020 starting April 1, from 0.7 percent projected in October, sources familiar with the bank’s thinking said. An upgrade would follow fiscal stimulus added by the government to ease the impact of the October tax hike.

As for prices, however, the BOJ is likely to leave its inflation forecasts below its target despite the tax hike. In October, it forecast core consumer prices would pick up 1.1 percent next fiscal year and 1.5 percent in fiscal 2021.

“There could be risks that the nation’s inflation loses momentum under such tepid levels,” analysts at Mitsubishi UFJ Morgan Stanley Securities Co. said in a recent report.

In a time of both misinformation and too much information, quality journalism is more crucial than ever.
By subscribing, you can help us get the story right.