Bank of Japan may raise inflation forecasts: Report

The Bank of Japan (BOJ) is planning to raise its inflation forecasts in January, Nikkei reported. The forecasts may show price growth close to its 2 per cent target in fiscal 2023 and 2024.

Earlier this month, BOJ shook markets by widening its 10-year yield cap range. This move is officially aimed  at straightening out bond market distortions but seen by some analysts as a prelude to the exit from its ultra-loose monetary easing.

Upgrades to the BOJ’s inflation forecast would further fuel such speculation as Governor Haruhiko Kuroda has said the central bank could discuss the exit if achievement of its 2% inflation target in tandem with wage hikes comes into sight.

Nikkei, citing people familiar with discussions at the central bank, said that the proposed changes would show the core consumer price index rising around 3% in fiscal 2022, between 1.6% and 2% in fiscal 2023, and nearly 2% in fiscal 2024.

Previous forecasts were released in the month of October. They were around 2.9 %, 1.6% and 1.6%, respectively.

Japan’s core consumer prices excluding fresh food items rose 3.7% in November, the highest since 1981, government data showed last week.

But Kuroda has dismissed the chance of a near-term interest rate hike, saying recent price rises were driven by one-off increases in raw material costs rather than strong demand.

The BOJ will release the latest quarterly growth and price outlook after its next policy meeting on Jan. 17-18.

(With inputs from agencies)

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