BOJ seen lifting inflation forecasts as pressure on policy grows
By Leika Kihara
TOKYO (Reuters) — The Bank of Japan is expected to raise its inflation forecasts this month to show prices exceeding its 2% target for two straight years, three people familiar with the matter said, complicating its efforts to keep monetary policy accommodative.
In fresh quarterly growth and inflation forecasts due at its two-day policy meeting ending on Oct. 31, the BOJ is set to raise its core consumer inflation forecast for the year ending in March 2024 to near 3% from the current 2.5% projection made in July, the sources said.
It is also seen upgrading its forecast for 2024 from the current 1.9%, to at or above 2.0%, as recent rises in oil costs are expected to push up utility bills, they said.
The revisions would heighten scrutiny on the BOJ's argument that it can keep monetary policy ultra-loose because «sustained» achievement of its 2% target has yet to come in sight.
It would additionally raise pressure on the BOJ to lift its 1.0% cap on the 10-year government bond yield set just three months ago, an option some in the central bank do not rule out as a possibility.
«The BOJ may upgrade its price forecasts, but probably wants to keep its easy-policy framework intact for now. What it could do, instead, is to raise the cap and explain it as aimed at making the framework more flexible,» said Naomi Muguruma, senior market economist at Mitsubishi UFJ (NYSE:MUFG) Morgan Stanley.
«But doing so could put the BOJ's accountability on the line as actual rates would move too far away from its 0% target.»
BOJ governor Kazuo Ueda is seeking to unwind the complex monetary stimulus deployed by his predecessor Haruhiko Kuroda over the past decade, which is blamed for causing a range of distortions in financial
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