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Inflation Forecasts Set To Rise Again, But Policy To Remain Unmoved


Ahead of the BOJ's re-assessment of the medium-term growth and price outlook at the Oct 27-28 meeting, Kyodo reported earlier today that the BOJ will raise its FY22 CPI forecast to the upper half of the 2% range (ie between 2.5-3%) from 2.3% currently.

  • That 2.3% forecast is for Y/Y core for the fiscal year ending Mar 2023; the BOJ is also currently forecasting 1.4% to Mar'24, and 1.3% to Mar '25. The Kyodo report notes that they could tweak CPI forecasts for those fiscal years too - but not to above 2%.
  • The current FY forecast increase seems like a plausible revision as it would basically be marking-to-market: Core CPI hit 2.8% Y/Y in August, with September's expected to have come in at 3% (data is out Oct 21st).
  • The BOJ upwardly revised this fiscal year's forecast to 2.3% at the July meeting, from 1.9% in April (was 1.1% in Jan).
  • Despite intervening to support the Yen on Sept 22 for the first time in 24 years, inflation data and expectations are unlikely to sway BOJ policy (including Yield Curve Control - see MNI INSIGHT: BOJ Unmoved by Rising Inflation, Slumping Yen) MNI's Policy Team reported in August that while the Bank sees core inflation rising close to 3% in coming months, it doesn't expect it to be sustainable without big wage hikes.
  • And as per our last BOJ meeting review, we expect the BoJ to remain on hold through the end of Governor Kuroda’s term (which runs into April 2023).

Source: Statistics Bureau of Japan, MNI

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