By Megumi Fujikawa
TOKYO (Dow Jones) — The Japanese central bank has slightly raised its inflation expectations in view of the pandemic-related supply bottlenecks. However, the Bank of Japan (BoJ) continues to assume that it will not reach its target rate of 2 percent, at least in the next two fiscal years.
In its quarterly forecast report on inflation and growth, the central bank is now projecting an inflation rate of 1.1 percent for the fiscal year 2022/23 and the following year. So far, she had assumed 0.9 and 1.0 percent. In this fiscal year, which ends in March, prices are likely to stagnate.
The pandemic has caused shortages of goods and components amid a global recovery in consumer demand. In the United States, inflation recently rose to 7 percent, the highest level in four decades.
In Japan, companies are struggling to pass on higher costs to price-sensitive consumers, most of whom have not received meaningful wage increases. While producer prices increased by 9.2 percent in November and 8.5 percent in December, consumer prices increased by only 0.6 percent in November. There is no data for December yet.
The Bank of Japan also lowered its growth forecast for the current year. She is only assuming growth in the Japanese economy of 2.8 percent, previously she had forecast 3.4 percent. She justified the downward revision with problems in the supply chains. Gross domestic product is expected to increase by 3.8 percent in 2022/23, and by 1.1 percent in the following year. The central bank had previously forecast growth of 2.9 percent and 1.3 percent here.
The central bank left the deposit rate at minus 0.10 percent and the target yield for ten-year government bonds at zero percent.
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(END) Dow Jones Newswires
January 18, 2022 00:44 ET (05:44 GMT)