BOJ Trims Growth Forecast Leaves Price Outlook Intact, Stands Pat on Policy
TOKYO--The Bank of Japan slightly cut its growth outlook in a new projection released Tuesday, but kept its policy on hold and maintained a bullish consumer-price forecast, suggesting officials feel little urgency to add to their aggressive stimulus measures.
The central bank updates the forecasts once every quarter, attracting close market attention as they are seen as a barometer of how inclined the central bank is to change monetary policy over the following months. As the BOJ's primary goal is to wipe out deflationary pressure and achieve 2% inflation, the absence of downward revisions to the inflation projections suggests a slimmer chance of immediate easing measures.
Officials have so far played down the need of further action, saying they are on track to meet their target of 2% inflation by next year, even as Japan's economy shows signs of stress following a national sales tax increase to 8% from 5% that took effect April 1.
The central bank now expects the economy will grow a price-adjusted 1.0% for the current financial year ending March, compared with the previous forecast of a 1.1% expansion.
The BOJ kept its growth forecasts for the next fiscal year and for fiscal 2016 unchanged at gains of 1.5% and 1.3%, respectively.
The central bank kept all its price forecasts unchanged. The central bank expects the core consumer price index to rise 1.3%, adjusted for the tax change, in the ongoing financial year. The figure represents the board's median expectation. The board sees inflation of 1.9% in the year through March 2016, and 2.1% for the year ending March 2017.
The core CPI climbed 1.4% in May from a year earlier, the month for which latest government data are available.
The BOJ releases its forecast in April and October through semiannual outlook reports, and conducts interim reviews in January and July.
Mr. Kuroda will hold a news conference from 0630 GMT.
The economy is likely in for a sharp contraction during the April-June quarter, as consumer spending plummeted in the wake of the sales tax increase. But officials have remained upbeat, saying the slowdown has been within their expectations, causing some economists to push back their expectations for fresh easing steps.
Under the central bank's rosy scenario, corporate spending and government stimulus will keep the economy going until consumption recovers, while a tightening labor market and rising inflation expectations will put more upward pressure on prices, fueling the transition to inflation from over a decade of deflation.
Mr. Kuroda has also said the inflation rate will fall to "around 1%" over the summer on stabilized import costs, but will resume an upward march toward 2% later this year. That is likely a message that it is wrong to bet on fresh easing steps, barring a clear drop in the inflation rate below 1%, economists say.
The BOJ board voted unanimously to maintain its easing measures, which aim to increase the amount of money in Japan's banking system at an annual pace of ¥60 trillion-¥70 trillion.