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MNI (London)
     TOKYO (MNI) - The Bank of Japan board's median forecast for inflation in
fiscal 2021 is +1.6%, indicating that the 2% price stability target will not be
achieved over its projection period, the BOJ quarter Outlook Report released
Thursday showed.
     But the policymakers maintained the view that the momentum towards
achieving the 2% price target is maintained, vowing to keep their easy policy
for an extended period of time, at least through 'around spring 2020', the
report said.
     It also said large downside risks to economic activity and prices.
     After a run of weak price data and slow corporate price hikes, the BOJ
revised down its inflation projection for fiscal 2020 to 1.4% from the 1.5%
presented in January, following, although they left the median forecast for
fiscal 2019 unchanged at 1.1%.
     Other key points from the Outlook Report:
     --The median forecast for core CPI (excluding fresh food) by the
nine-member board in fiscal 2021 -- the first forecast for that year -- is
+1.6%, which is still below the 2% price target.
     --The median inflation forecast for fiscal 2020 was also revised down to
+1.4% from the +1.5% made in January, while that for fiscal 2019 was left
unchanged at 1.1%.
     --The BOJ said, "With regard to the outlook for economic activity, risks
are skewed to the downside, particularly regarding developments in overseas
economies." "Regarding the outlook for prices, risks are skewed to the
downside," it added.
     --The median economic growth forecast for the current fiscal year was
revised down to +0.8% from +0.9% made in January. The GDP projections for fiscal
2020 was also revised down to 0.9% from 1.0% made in January.
     --The median forecast for real GDP in fiscal 2021 -- again the first
forecast -- is x1.2%.
     --The BOJ continues to see Japan's potential growth rate in a range of 0.5%
to 1.0%.
     --The BOJ board tweaked the assessment of the economic climate, saying that
Japan's economy has been on a moderate expanding "trend", with a virtuous cycle
from income to spending operating, although exports and production have been
affected by the slowdown in overseas economies. The previous assessment didn't
include the wording of "trend."
     --The board maintained its cautious view, repeating, "Inflation
expectations have been more or less unchanged." "The momentum toward achieving
the price stability target of 2% is maintained but is not yet sufficiently
firm," the report added.
     --"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 report said, "The year-on-year rate of change in the CPI has been
positive but has continued to show relatively weak developments compared to the
economic expansion and the labor market tightening."
     --The BOJ repeated its assessment that "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," the report said.
     --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:
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