MNI BRIEF: BOJ To Raise CPI View; Eyes CPI Base Year Change

The Bank of Japan's median forecast for inflation this fiscal year will be revised up from April's +0.1% due to upward pressure from higher crude oil prices and the base effect of accommodation prices, MNI understands.

Downward pressure from low mobile phone charges continues to exert pressure but will be somewhat offset by higher energy prices, according to the BOJ view.

Bank officials expect that a gradual rise in the underlying trend of prices, excluding special factors, will continue.

Charges for electricity and gas will be raised in or after September in the wake of the past rise in crude oil prices.

Prices for accommodations fell more than 30% y/y from August to December last year due to the government 'Go To' travel campaign.

The government may resume the travel campaign to boost consumer spending if the state of emergency is lifted, but the BOJ will not incorporate its impact on the inflation rate.

The base year for calculating the consumer price index will be shifted to 2020 from 2015, and this will increase the weight of low mobile phone charges, which will be available on Friday.

But the precise nature of the phone charges used in calculating the CPI will not be made available, making it difficult for BOJ economists to calculate the impact.

The BOJ will likely point to downward pressure from the base year change but the central bank will not incorporate the impact into forecasts.

The economic growth forecast will be revised slightly higher from April's 4.0%, due to stronger overseas demand as bank officials see that production adjustments by automobile makers due to the semiconductor shortage will not affect the underlying trend.

Pent-up demand for services after the spread of vaccinations also will boost economic growth, but the pace of the recovery in consumption remains uncertain.

However, the fourth state of emergency in Tokyo from Monday to August 22 will impede spending.