Tokyo: The Bank of Japan on Thursday slashed its annual inflation forecast and once again delayed its timetable for hitting a two per cent target as the economy struggles to gain traction despite years of stimulus.
Central bankers also decided to maintain the BoJ’s ultra-loose monetary policy at a time when their counterparts in other major economies from the Americas to Europe consider ending the era of cheap cash.
The bank said it now expects the core consumer price index to rise 1.1 per cent in the year to March, down from its April estimate of 1.4 per cent, while its March 2019 prediction was cut to 1.5 per cent from 1.7 per cent previously stated.
In a statement after the policy meeting the bank also said it now expects to achieve the two per cent objective sometime in the year to March 2020.
Officials had originally set in 2013 a two-year timeline when unveiling the bank’s massive monetary easing programme as part of Prime Minister Shinzo Abe’s push to kickstart growth in the world’s number-three economy.
“The BoJ has already pushed out the timeline several times. Now four years have passed, and there is no sign the inflation rate is rising,” Masaaki Kanno, chief economist at Sony Financial Holdings in Tokyo and a former BoJ official, told Bloomberg TV.
However, the bank did lift its economic growth outlook to 1.8 per cent for the current fiscal year from its previous estimate of 1.6 per cent. It also hiked its fiscal 2018 outlook by 0.1 percentage point to 1.4 per cent.
Tokyo’s years-long effort to kickstart growth — a blend of massive monetary easing, government spending and red-tape slashing — stoked a stock market rally, weakened the yen and fattened corporate profits, but growth in the wider economy remains fragile.
While Japan’s job market is tight, individual spending — which accounts for more than a half of the country’s gross domestic product — has remained in the deep freeze.
And analysts were sceptical about whether the BoJ would achieve its goals.
“Even after today’s downward adjustments, the bank’s inflation forecasts for the current fiscal year remain too high and there is little chance of hitting the two per cent target next year either,” Marcel Thieliant, economist at Capital Economics, said in a commentary.
“The upshot is that we expect the bank to leave policy settings unchanged for the foreseeable future.” — AFP
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