BoJ To Cut Prices Forecasts

Forex News

This week, Bank of Japan will review all reasons for the weak inflation. The stimulus program is unlikely to be changed, but the price growth outlook will definitely be altered. One of the BoJ policymakers noted: "When inflation is so subdued, it's hard to signal even prospects of a future exit from easy policy". The results aren’t expected to be publicized until the July meeting.

Meanwhile, companies are desperately trying to increase productivity by changing prices, which in turn, might weigh on price growth for years. Makoto Sakurai, BOJ board member, stated: "Companies are undertaking capital expenditure to streamline operations and reviewing inefficient businesses", and: "The increase in companies' output capacity could delay rises in wages and inflation in the short-term. But this likely won't be a permanent drag.”

Core consumer prices grew 0.7% comparing to 2017, pointing at slowdown for the second consecutive month. Tokyo core consumer inflation only rose to 0.5% in prior month. That’s why, Bank of Japan might reduce its price growth projections. In April forecasts, the Bank saw core consumer inflation reaching 1.3% in the year ending in March 2019, and then improving to 1.8% percent in the next year.

Yoshiki Shinke unveiled: "Inflation is surprisingly weak, especially for non-energy goods. It shows companies are very reluctant to raise prices, after previous price hikes scared away consumers", adding that: "It's only a matter of time before the BOJ cuts its price forecasts again. It may do so in July or wait until October."