TOKYO: Japan will fail to reach its two-percent inflation target even by 2022, the central bank predicted on Thursday as it also revised down its estimate for growth in the world’s third-largest economy.
In its closely watched quarterly report, the Bank of Japan forecast inflation of 1.6 percent in the fiscal year ending March 2022, meaning its years-long battle to reignite prices is far from won.
The BoJ revised down its inflation forecast for the year to March 2021 to 1.3 percent from 1.4 percent.
Japanese inflation currently stands below one percent, less than halfway to target, despite six years of aggressive monetary stimulus under BoJ Governor Haruhiko Kuroda.
The central bank kept its ultra-loose monetary policy in place after a two-day policy board meeting but added a fresh timeframe, saying the “extremely low” rates would be maintained “at least through around spring 2020.”
It cited global economic uncertainties and the risks of a scheduled hike in consumption tax later this year from eight percent to 10 percent.
Economic growth would also come in at 0.8 percent this fiscal year, climbing to 0.9 percent the year after — both downward revisions of 0.1 percentage points.
It forecast GDP at 1.2 percent in the fiscal year ending in 2022.
Kuroda has come under fire over the effectiveness of his monetary easing program and how he intends to return the bank’s policy to normal.
In 2013, the BoJ embarked on a huge bond-buying program in a bid to stimulate long-dormant prices with the stated aim of hitting the two percent mark within two years.
But while the plan — which ran in tandem with Prime Minister Shinzo Abe’s big-spending drive to ramp up the economy — showed early promise, the bank has been forced to delay several times the date for hitting its target.
In January, Kuroda was forced to revise down the BoJ’s inflation forecasts, a step seen as further evidence that authorities are unable to boost prices.
Other central banks have been gradually taking more guarded views on the global economy, with minutes of the US Federal Reserve’s policy meeting last month showing board members split between optimism and caution.
Kuroda is due to speak later Thursday.
Bank of Japan cuts inflation, economic growth forecasts
Bank of Japan cuts inflation, economic growth forecasts
- The Bank of Japan revised down its inflation forecast for the year to March 2021 to 1.3 percent from 1.4 percent
- Japanese inflation currently stands below one percent, less than halfway to target
Middle East war economic impact to depend on duration, damage, energy costs, IMF official says
- Katz: Prolonged increase in energy prices could unanchor inflation expectations
- IMF: 2026 global GDP outlook was solid, too early to judge war’s impact on growth
WASHINGTON: The Middle East war’s impact on the global economy will depend on its duration and damage to infrastructure and industries in the region, particularly whether energy price increases are short-lived or persistent, the International Monetary Fund’s number two official said on Tuesday.
IMF First Deputy Managing Director Dan Katz told the Milken Institute Future of Finance conference in Washington that if there is prolonged uncertainty from the conflict and a prolonged impact on energy prices, “I would expect central banks to be cautious and respond to the situation as it materializes.”
He said the conflict could be “very impactful on the global economy across a range of across a range of metrics, whether it’s inflation, growth and so on” but it was still early to have a firm conviction.
Prior to the US and Israeli air strikes on Iran and counterattacks across the region, the IMF had forecast solid global GDP growth of 3.3 percent in 2026, powering through tariff disruptions due in part to the continued AI investment boom and expectations of productivity gains.
Katz said that the economic impact from the Middle East conflict would be influenced by its duration and further geopolitical developments.
Earlier, the IMF said it was monitoring the conflict’s disruptions to trade and economic activity, surging energy prices and increased financial market volatility.
“The situation remains highly fluid and adds to an already uncertain global economic environment,” the Fund said in a statement issued from Washington. Katz said the IMF will look at the conflict’s direct impacts on the region, including damage to infrastructure, and disruptions to key sectors.
“Tourism is an important one. Air travel. Is there physical damage to infrastructure, production facilities, and the big industry in particular that everyone will be focused on is, of course, the energy industry,” he said.
Oil rose further on Tuesday as Iran vowed to attack ships passing through the Strait of Hormuz. Brent crude oil , the global benchmark, surged to $83 per barrel, up 15 percent from its level on Friday.
Katz said he expected central banks to “look through” a temporary rise in energy prices, given their focus on core inflation. But central banks could respond if a more persistent energy shock results in “a destabilizing of inflation expectations.”
He said the post-COVID inflation spike of 2022 was influenced by energy impacts from Russia’s invasion of Ukraine, with more pass-through from headline inflation to core inflation.
“And so I’m sure central banks, as they are thinking about how the geopolitical situation is translating into energy markets, will be looking at the lessons of the pandemic and seeing if they can apply any of those lessons in setting monetary policy,” Katz said.
