BOJ is considering slight inflation forecast upgrade as yen falls

[TOKYO] The Bank of Japan is considering a slight increase in its consumer price forecasts at its next policy meeting as a rapid decline in the yen pushes up import prices, several sources with direct knowledge of the matter told Reuters.

The BOJ currently expects consumer prices to rise by 1.5 per cent in fiscal 2017 and by 1.7 per cent in fiscal 2018, according to forecasts it issued in November.

Any upgrade is likely to be minor when the BOJ updates its forecasts at a policy meeting on Jan 30-31, but a recent stabilisation in oil prices and a more healthy global economy are also supportive for Japanese inflation, the sources said.

"This is not just about a weak yen," one source said.

"The global economy has improved from the second half of last year and there has been an adjustment in inventories in emerging markets."

The BOJ will issue a quarterly update of its economic growth and consumer price forecasts at the meeting.

When the BOJ last issued its forecasts at the beginning of November, the US dollar was trading around 104 yen.

Since then, the yen has tumbled around 10 per cent due to speculation that US President-elect Donald Trump's policies will spur growth and cause US interest rates to rise quicker than expected.

Signs of a turnaround in Japanese exports and factory production prompted the BOJ to raise its economic outlook last month, highlighting the central bank's growing confidence that the economy will be stronger this year.

REUTERS