MNI BRIEF: BOJ Lifts FY22 GDP View, CPI Unchanged In Outlook

The Bank of Japan board on Thursday upgraded its GDP forecast for the fiscal year started April 2022 to +2.9% from +2.7% in July but the median inflation forecast was unchanged at July's +0.9% in its latest Outlook Report as the central bank held policy steady.

The BOJ also lowered its forecasts for real economic growth and the inflation rate this fiscal year, as expected, to 3.4% and to flat respectively in the wake of weaker private consumption and exports and production.

The BOJ maintained the baseline view that Japan's economy has picked up as a trend, although it has remained in a severe situation due to the impact of Covid-19 at home and abroad."

"Risks to economic activity are skewed to the downside for the time being, mainly due to the impact of Covid-19, but are generally balanced for the middle of the projection period onward," the BOJ said. "Risks to prices are skewed to the downside,

But the BOJ also upgraded its assessment on prices, saying "inflation expectations have picked up." The previous view was "inflation expectations have been more or less unchanged."

But the BOJ lowered its assessment on exports and industrial production following their recent weak moves.

"Exports and industrial production have continued to increase as a trend, despite being weak recently due to the effects of supply-side constrains seen in some areas," the BOJ said.

The median GDP forecast in fiscal 2023 remained +1.3% and the median inflation forecast was unchanged at +1.0% from +1.0%, meaning that the 2% price target will not be achieved under Governor Haruhiko Kuroda, whose second five-year term ends in April 2023.