The Bank of Japan said inflation was likely to rise above its 2 percent target this fiscal year, but kept interest rates unchanged to support the country’s economic recovery from the pandemic.
Japan’s central bank kept short-term interest rates at -0.1% and the target for the 10-year bond yield at around zero.
The d.s. of the Bank expects core inflation to come in at 2.3% in the current year ending in March 2023, higher than the BoJ’s target of 2%, according to the bank’s quarterly estimates released today. The previous estimate predicted a rise to 1.9%.
Inflation forecast by the Bank of Japan is much softer than in the US, where it stood at 9.1% in June, the highest rate since November 1981.
Federal Reserve officials have hinted that they will raise interest rates by 0.75% later in the month.
The BoJ’s accommodative stance has recently fueled the yen’s decline against the US dollar.
After Thursday’s announcement, the yen traded at 138.21 yen against the dollar, while last week the Japanese currency hit a new 24-year low of more than 139 against the dollar.
The bank expects core inflation to slow to 1.4% this year ending March 2024 and to 1.3% next year.
Meanwhile, the BoJ forecast that the Japanese economy will grow 2.4% this fiscal year, down from 2.9% previously forecast.
It forecasts growth of 2% in the year ending March 2024 and 1.3% the following year.
Source: Capital
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