ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronEye IconIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailPositive ArrowIcon PrintSite TitleTitle ChevronIcon Twitter
Economy

Bank of Japan to consider cutting inflation forecasts

Slower price growth in April raised alarms

Bank of Japan Gov. Haruhiko Kuroda at a news conference in March. The central bank may lower its price forecasts for fiscal 2018 and beyond. (Photo by Akira Kodaka)

TOKYO -- The Bank of Japan will look into why inflation remains weak at its policy-setting meetings in June and July, and could downgrade its price forecasts for fiscal 2018 and later.

At a two-day meeting starting June 14, the central bank is expected to explore the root causes of slow price growth. Discussions there will be reflected in the BOJ's next quarterly outlook on the economy and prices, slated for release in late July.

The bank has long assumed that a "deflationary mindset" -- low expectations of price growth  -- and sluggish wage growth have combined to keep prices from rising. But particularly slow growth in April, when companies tend to adjust prices for a new fiscal year, surprised many at the central bank.

Consumer prices nationwide, excluding fresh food, increased just 0.7% on the year in April, compared with 0.9% growth in March.

In May, prices in central Tokyo edged up 0.5%, slowing for the third month in a row. These prices are released a month ahead of their nationwide counterpart and are seen as a leading indicator of trends throughout Japan.

In April's outlook, the bank abandoned its target date for achieving 2% inflation and trimmed its price growth forecast for fiscal 2018 to 1.3% from 1.4%. It pegged growth in fiscal 2019 and fiscal 2020 at 1.8%. July's report could see the fiscal 2018 figure cut further. Downgrades for fiscal 2019 and beyond will be considered as well.

Starting last July, the BOJ's reports have suggested prices are headed toward the bank's 2% inflation target as a narrowing macroeconomic supply-demand gap pushes companies to raise wages and prices. But while demand now exceeds supply throughout the economy, businesses have remained shy about increases on either front. Consumers, for their part, have sought out cheaper goods.

This time around, the central bank looks to present a more thorough explanation for this state of affairs. In addition to supply and demand factors, the BOJ may dig in to whether structural changes in the economy have had an impact on prices. Some say that the spread of online shopping has led consumers to look for ever-lower prices, for example, and that the free flow of goods and labor across borders has weighed prices down in Japan, Europe and elsewhere.

This reassessment may lead the BOJ to bring its price forecasts closer to those from private-sector economists, who have long taken a more pessimistic view than the central bank.

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Try 1 month for $0.99

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world
.

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends July 31st

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to the Nikkei Asian Review has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media