BOJ Mulls Sharp Increase in 2023 Inflation Outlook

Bank of Japan officials meeting this week will probably consider a sharp increase to their inflation forecast for this fiscal year, while also discussing concerns about whether the upward trajectory is sustainable, according to people familiar with the matter.

(Bloomberg) — Bank of Japan officials meeting this week will probably consider a sharp increase to their inflation forecast for this fiscal year, while also discussing concerns about whether the upward trajectory is sustainable, according to people familiar with the matter.

The central bank’s policy board is likely to mull raising the consumer inflation projection to around 2.5% for the year ending in March, up from 1.8% in the April estimate, according to the people. They expect projections for the following fiscal years to be largely unchanged to reflect a lack of confidence the bank can achieve its 2% inflation goal in a stable manner, the people said.

The BOJ will release its quarterly economic report together with a policy statement at the Friday conclusion of the two-day policy board meeting.

Economists surveyed by Bloomberg widely expect the central bank to keep its policy settings steady at that meeting. A minority predicts the BOJ will tweak the yield curve control mechanism, although some people close to the bank have said officials don’t see an urgent need to make changes at this point.

Japan’s government raised its overall inflation forecast to 2.6% last Thursday. Economists estimated the BOJ would raise its forecast for inflation excluding fresh food to 2.3%, according to the survey.

Governor Kazuo Ueda has made the case for sticking with monetary stimulus on the premise that gains in prices are expected to subside toward the end of the year.

In updating the bank’s Outlook Report, the board will probably discuss upgrading their economic assessment for the first time in a year, potentially characterizing the economy as in recovery, the people said. That would bring the BOJ’s assessment in line with the government’s.

–With assistance from Peter Elstrom.

(Adds details on expectations surrounding Friday’s policy board meeting)

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