TOKYO – The Bank of Japan cut on Tuesday once again its inflation target for the current fiscal year at the end of its two-day monthly meeting, while maintaining the monetary stimulus program.
The Japanese central bank cut its inflation forecast for the year ending March 31, 2018, to 0.8 percent, 0.3 percent lower than its earlier estimate.
The bank also revised upwards its growth forecast for the world’s third largest economy to 1.9 percent in its quarterly outlook report, approved at the end of its monetary policy meeting.
This was the third downward revision of the inflation forecast by the BoJ in its quarterly reports, a response to the steady decline in domestic consumption, which is hampering the growth of the consumer price index.
The BoJ estimated that prices would increase gradually in the long term, although it pointed out that they were not at a desired pace and would need to be monitored carefully.
In its previous quarterly outlook report, approved in July, the central bank had also postponed its forecast for reaching 2 percent inflation, for the sixth time, to the second quarter of 2019.
Since the spring of 2013, the Bank of Japan has carried out a massive asset purchase program as part of the policy to end the cycle of falling prices that has been afflicting the Japanese economy for nearly two decades.
However, the drop in global oil prices has forced it to repeatedly delay the timeline for the 2 percent target and adopt additional measures.
Among these was the bank’s decision to keep the benchmark rate for some banks’ reserves at minus 0.1 percent and control the yield curve to keep long-term rates at around 0 percent, the monetary measures which were kept in place – by an 8-1 vote – at the monthly meeting that ended on Tuesday.
The approval will allow the bank to maintain its sovereign debt acquisition, amounting to 80 trillion yen ($716 billion) per year, to maintain the yield on the 10-year Japanese bond at around 0 percent.
The BoJ will make adjustments to its policy when appropriate, depending on the economic and financial conditions and the development of prices, in order to maintain a steady, long-term, increase in inflation, the report said.
The bank also believes the Japanese economy will continue to expand moderately, due to the increase of exports and the recovery of corporate capital investment, the two main factors leading to the slight increase of its growth forecast for the current financial year.