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MNI (London)
     TOKYO (MNI) - The Bank of Japan revised down its inflation projection for
fiscal 2019 to 0.9% from the 1.4% presented in October, following a run of
weaker than expected price data and downward pressure from the fall in crude
prices on consumer prices, the BOJ quarterly Outlook Report released Wednesday
     The BOJ board also lowered the median inflation rate forecast in fiscal
2020 to 1.4% from 1.5% made in October.
     However, the board maintained the assessment that the momentum toward
achieving the 2% price target is maintained, although it isn't sufficiently firm
and it remains vigilant against the outlook for inflation rate, saying, "Risks
to both economic activity and prices are skewed to the downside."
     Other key points from the Outlook Report:
     --The median forecast for core CPI (excluding fresh food) by the
nine-member board was revised down to +0.9% for fiscal 2019 from +1.4% projected
in October.
     --The median inflation forecast for fiscal 2020 was also revised down to
+1.4% from +1.5% made in October, while that for fiscal 2018 was lowered to
+0.8% from +0.9%. The forecast excludes the direct impact of a sales tax hike to
10% from 8% planned in October 2019 and policies concerning the provision of
free education.
     --The BOJ repeated its risk analysis presented in October, saying, "With
regard to the risk balance, "risks to both economic activity and prices are
skewed to the downside."
     --The median economic growth forecast for the current fiscal year was
revised down to +0.9% from +1.4% made in October. But the GDP projections for
fiscal 2019 and 2020 were revised higher from 0.8% to +0.9% and +1.0%
respectively. The BOJ continues to see Japan's potential growth rate in a range
of 0.5% to 1.0%.
     The board maintained its cautious view, repeating, "Inflation expectations
have been more or less unchanged." The inflation outlook among firms and
households has bottomed out, but it has not shown a clear uptrend.
     "The year-on-year rate of change in the consumer price index (excluding
fresh food) has been positive but has continued to show relatively weak
developments compared to the economic expansion and the labor market
tightening," the BOJ said.
     The BOJ repeated its assessment, saying, "The momentum toward achieving the
2% price target is maintained but it is not yet sufficiently firm."
     "Firms' cautious wage- and price-setting stances" have not yet clearly
changed, and "firms moves toward raising productivity as well as the
technological progress in recent years" continues, the BOJ added.
     The bank also repeated: "Examining financial imbalances from a longer-term
perspective, there is no sign so far of excessively bullish expectations in
asset markets or in the activities of financial institutions."
     But it warned that any "Prolonged downward pressure on financial
institutions' profits with the low interest rate environment and severe
competition among financial institutions continuing, could create risks of a
gradual pullback in financial intermediation and of destabilizing the financial
     As for the conduct of monetary policy, the BOJ repeated it would make
policy adjustments as appropriate, "taking account of developments in economic
activity and prices as well as financial conditions, with a view to maintaining
the momentum toward achieving price stability target."
--MNI Tokyo Bureau; tel: +81 90-2175-0040; email:
--MNI London Bureau; tel: +44 203-586-2225; email:
[TOPICS: MAJDS$,MMJBJ$,M$A$$$,M$J$$$,MT$$$$]
MNI London Bureau | +44 203-865-3812 |
MNI London Bureau | +44 203-865-3812 |
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