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Abe's stimulus plan to moderate any BOJ price f'cast cuts: sources

Wednesday, July 13, 2016 - 15:51
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The Bank of Japan will factor in the government's planned fiscal stimulus package in producing new quarterly projections this month, which will help moderate any cuts to its inflation forecasts, sources familiar with its thinking said.

[TOKYO] The Bank of Japan will factor in the government's planned fiscal stimulus package in producing new quarterly projections this month, which will help moderate any cuts to its inflation forecasts, sources familiar with its thinking said.

The BOJ is usually reluctant to factor in the effect of fiscal stimulus packages unless details, including the actual size of spending, are finalised and announced by the government.

Prime Minister Shinzo Abe has yet to announce the size of his planned stimulus package and may not finalise the amount before the BOJ's policy meeting on July 28-29, when the bank conducts a quarterly review of its growth and price forecasts.

But the BOJ will likely take into account the impact from the upcoming package, which analysts say could be worth around 10 trillion yen (S$130 billion), and the boost to consumption from a delay in the sales tax hike scheduled for April 2017, the sources said.

"The prime minister has made it quite clear there will be a sizable stimulus package aimed at beating deflation," said one of the sources.

"It would be strange not to take into account the effect of such a package in compiling estimates."

REUTERS