[TOKYO] Japan's economics minister said on Tuesday the Bank of Japan is unlikely to meet its inflation target next fiscal year because the collapse in oil prices puts downward pressure on consumer prices.
Economics Minister Akira Amari spoke one day after the government said it expects overall consumer prices to rise 1.4 per cent in fiscal 2015, well below the BOJ's target of 2 per cent inflation.
Mr Amari's comments are the clearest sign yet that the BOJ will either have to expand monetary policy further to meet its price target on schedule, or possibly allow more time for oil prices to rise. "Our forecasts show it will be difficult for the BOJ to achieve its price target due to falling oil prices," Mr Amari told reporters. "Lower oil prices aren't necessarily a bad thing for the economy, but they are a negative factor for the BOJ's price target." It is up to the BOJ to make its own decisions about the outlook for prices, Mr Amari said.
The BOJ launched quantitative easing on an unprecedented scale in 2013 to drive consumer inflation to 2 per cent around fiscal 2015, which starts in April.
The central bank's purchases of government debt and risk assets helped push down bond yields and initially boosted inflation expectations.
However, the outlook for prices started to weaken last year as consumer spending lost momentum after an increase in sales tax.
The BOJ has argued that consumer prices would accelerate again due to rising wages and a tight labour market, but this outcome is looking less likely in the face of an oil glut which could push Japan's consumer prices lower. Oil futures are the weakest since 2009.