BOJ cuts inflation outlook, stands pat on stimulus
THE Bank of Japan on Wednesday cut its inflation outlook for the three years through fiscal 2020 amid tepid price gains and heightened global trade tensions.
The central bank’s board, meanwhile, decided after a two-day meeting to keep long-term and short-term interest rates at their current ultralow levels and to continue its largescale asset purchases.
Governor Haruhiko Kuroda is scheduled to meet the press later in the day to explain the decision.
The revisions put the central bank’s elusive 2 percent inflation target, which Kuroda has pursued since entering office in 2013, even further from reach.
The BOJ cut its forecast for inflation in fiscal 2018 to 0.9 percent compared with 1.1 percent expected in July. Projections for fiscal years 2019 and 2020 were both cut by 0.1 percentage point to 1.4 percent and 1.5 percent, respectively.
The central bank also downgraded its outlook for growth in Japan’s gross domestic product for the current fiscal year ending in March by 0.1 percentage point to 1.4 percent.
An escalating tariff dispute between the United States and China, the world’s two largest economies, has sparked concerns that the effects could spill over to the rest of the world by reducing trading volume and undermining business sentiment.
The US Federal Reserve’s winding down of its own monetary easing measures also poses the risk of
triggering an outflow of capital from emerging markets.
In Wednesday’s decision, the BOJ maintained a pledge to keep interest rates low for “an extended period of time” as households and firms brace for an increase in the nationwide consumption tax next October.
It kept its benchmark for the 10year government yield at around zero percent while allowing for some flexibility, and retained a short-term interest rate of minus 0.1 percent for some funds that financial institutions keep parked at the central bank.
The BOJ also maintained a symbolic pledge to increase its holdings of government bonds at an annual pace of 80 trillion yen, and made no changes to its purchases of assets such as exchange-traded funds.
The board’s decision was reached by a 7-2 majority, with Yutaka Harada and Goushi Kataoka dissenting.