BOJ to cut 2017 price forecast only slightly, stick to rosy view: report1 min read . Updated: 22 Jul 2016, 06:35 PM IST
Japanese Prime Minister Shinzo Abe has said the government will announce a large spending package by the end of July
Tokyo: The Bank of Japan (BOJ) will likely to cut next fiscal year’s inflation forecast only slightly and largely maintain its upbeat projection for fiscal 2018 at a policy review next week, sources said, an outlook which could allow it to argue that there is no need for imminent monetary easing.
While falling import costs from a strong yen and weak consumption will weigh on inflation, such risks will be tempered by a boost to growth from an anticipated fiscal stimulus package and a delay in next year’s sales tax hike, sources familiar with the bank’s thinking said.
Prime minister Shinzo Abe has said the government will announce a large spending package by the end of this month.
“The boost from an expansionary fiscal policy suggests any downgrade to the BOJ’s inflation forecast won’t be too big," said one of the sources.
“The positive impact (of the government’s stimulus package) will be biggest in fiscal 2017," another source said on condition of anonymity due to the sensitivity of the matter.
The BOJ now expects core consumer inflation to hit 1.7% in the next fiscal year beginning in April 2017, far above private forecasts of 0.8%.
In a quarterly review of its projections to be conduced at a policy meeting on 29 July, the nine-member board is likely to cut the forecast to around 1.5%, the sources said.
It is seen roughly maintaining the 1.9% inflation forecast for fiscal 2018, which would back up its view that Japan is on track to achieve its price target, they said. Reuters