BOJ likely to raise price forecasts, cut growth view

THE Bank of Japan (BOJ) is likely to consider revising its inflation and growth forecasts later this month as a weaker yen and cost-push inflation force more companies to pass on higher costs to consumers, according to people familiar with the matter.

The central bank will probably raise its quarterly price projection to its target level of 2 per cent or above for the year ending next March from the 1.9 per cent view it gave in April, according to the people. An upward revision of the 1.1 per cent forecast for the following year is also likely to be discussed at the meeting on Jul 20-21, they said.

Following the heavy impact on Japan's manufacturing activities from China's pandemic lockdowns, the central bank is also likely to consider lowering its growth forecast for this year from the current 2.9 per cent view, the people added.

The new economic projections will be released together with the bank's policy decision at the end of the meeting. The BOJ remains strongly committed to continuing with monetary easing to firmly support Japan's slow economic recovery and achieve sustainable price gains, the people said.

The revisions are likely to reinforce governor Haruhiko Kuroda's case that the economy needs support through the continuation of monetary easing as cost-push inflation poses downside risks for the recovery. Kuroda's insistence on continuing support comes despite intensified speculation that the BOJ will tweak policy as central banks around the globe rush to tame historic inflation gains.

The BOJ will decide on policy by carefully assessing financial markets and economic data up to the last minute, the people said.

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Jiji reported earlier Thursday (Jul 7) that the BOJ is likely to raise its inflation forecast for the current fiscal year. BLOOMBERG