MNI: BOJ Likely To Trim FY21 CPI To Near Zero On New Base Year

The Bank of Japan will likely revise down the median forecast for the inflation rate this fiscal year to near zero percent from +0.6% made in July due to lower mobile phone charge caused by a base year change, MNI understands.

The BOJ board could make the change in October when it updates its medium-term economic growth and inflation rate forecasts.

WEIGHING RISKS

However, the board is expected to maintain the view that the underlying inflation rate trend excluding temporary factors remains solid.

But the BOJ will also review the risks that a lower consumer price index will increase downward pressure on inflation expectations, which are sensitive to the actual consumer price index, although the risk is not seen big now. Lower mobile phone charges are also expected to increase consumer purchasing power,.

COVID-19 IMPACT

However, there will be a careful examination on the outlook for private consumption as the BOJ cannot clearly judge how the rate of vaccinations and the spread of Covid-19 reflects on spending.

A former BOJ chief economist told MNI that Japan should be able to emerge from the current conditions as reported: MNI INTERVIEW: Japan Can Weather Pandemic Lockdowns: Sekine.

Despite a state of emergency in several prefectures in Japan to combat the spread of Covid-19, activity has not dropped sharply, and the rate of infections has not declined.

June CPI fell after the rebase to 2020 from 2015.