BOJ likely to keep next year’s price forecast around 2%

BANK of Japan officials will likely raise their inflation forecast above 2 per cent for this fiscal year at their July meeting, but their view for the following year is largely unchanged and may even be nudged down, according to people familiar with the matter.

While the likely upgrade will reflect stronger-than-expected price growth this year, the forecasts will show inflation slowing in the year starting April 2024. The BOJ’s latest projection for next fiscal year is 2 per cent.

The bank will finalise its new price projections after assessing economic data and financial markets up to the last minute, the people said. The BOJ will release its new quarterly outlook report on July 28 at the end of its policy meeting. 

Economists see inflation averaging 2.6 per cent this fiscal year, according to a survey this month, well above the bank’s 1.8 per cent forecast.

Bloomberg first reported the likelihood of an upward revision to this year’s forecast last month. 

The officials acknowledge a stronger-than-expected momentum of businesses passing their costs onto consumers this year, a key factor to mull raising their forecast, according to the people. 

SEE ALSO

BOJ highlights broadening wage, price hikes in report on regional Japan

DECODING ASIA

Navigate Asia in
a new global order

Get the insights delivered to your inbox.

Yet, if the bank clearly pushes up its inflation forecast for this fiscal year, that may provide a reason to consider a slightly lower price view for the following 12 months, the people said. 

The July meeting was cited as the most likely month for possible BOJ policy change by economists surveyed by Bloomberg in June. 

While the consensus view is that major policy change is still a ways off, speculation continues to simmer that the central bank may tweak its yield curve control framework this month. BLOOMBERG