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The Bank of Japan is increasingly upbeat about the outlook for the economy, but inflation is unlikely to come close to hitting target before the expiry of Governor Haruhiko Kuroda's term of office in April 2023, it indicated after its April policy meeting.

A "virtuous cycle" from income to spending is underway, Kuroda said on Tuesday, helped by an export sector recovery as the global economy picks up and corporate profits rise, driving an increase in capital investment.

The BOJ's overall risk assessment on economic activity improved, though "risks to prices are skewed to the downside" as falling mobile phone charges weigh, the Outlook Report published Tuesday showed.

MISSING TARGET

The BOJ's first forecasts for fiscal 2023 only saw core CPI rising to 1.0% y/y, leaving the central bank still shy of its 2% target when Kuroda's second term in office expires in April 2023.

"Achieving the 2% price target is a BOJ mission," Kuroda told reporters following the policy meeting, adding that it must remain a core aim for policymakers even the objective is not achieved during his governorship.

The median inflation forecast this fiscal year was lowered to +0.1% from +0.5% in the wake of downward pressure from lower mobile phone charges.

HIGHER GROWTH OUTLOOK

Overall, the economy is expected to continue growing, despite downside risks including a spread of Covid infections, with the median GDP forecast for the current year revised up to +4.0% from +3.9%.

Despite the more upbeat outlook, the BOJ left its yield curve control policy in place, leaving the short-term overnight rate at -0.1% and the 10-year policy interest rate at around zero percent. It maintained forward guidance that the Bank will close monitor the impact of Covid-19 and will not hesitate to take additional easy policy if needed. It expects short- and long-term rates to remain at their present or lower levels