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The Bank of Japan board left the median forecast for the core consumer price index in fiscal 2023 unchanged at 1.6% but upgraded its forecast for core CPI in fiscal 2024 to 1.8% from 1.6% made in October, the BOJ’s Outlook Report released Wednesday showed.
The updated inflation view will justify the BOJ to maintain its easy policy as the achievement of 2% price target in a stable and sustainable manner hasn't come into sight.
The focus has shifted to the inflation view in fiscal 2025 in the next Outlook Report in April after the scale of wage hikes at major firms are available in mid-March.
Bank officials are focused on how wage hikes spread to smaller firms that are suffering from high costs and labor shortages.
The median forecast for real economic growth this fiscal year was revised down to 1.9% from 2.0% and the growth forecast in fiscal 2023 was also revised down to 1.7% from 1.9%. The economic growth forecast in fiscal 2024 was revised down to 1.1% vs. 1.5%.
The core CPI will likely stay above 2% that the BOJ is targeting and wage hikes holds the key for Japan’s CPI to close in on a sustainable rise and for policymakers to move closer to the stage of considering policy adjustments.
The BOJ tweaked the risk assessment slightly from October, saying, “With regard to the risk balance, risks to economic activity are skewed to the downside for fiscal 2022 and 2023 but are generally balanced for fiscal 2024. Risks to prices are skewed to the upside.”
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.