ShreeMetalPrices: BOJ to Revise Projections for a key Inflation Index.


As per three sources aware with the Bank of Japan’s (BOJ) approach. The Bank of Japan is focusing more significance on inflation gauge which exclude oil prices. And will likely increase its forecasts for index growth within the quarter forecasts due later this month.

The rise would reflect the central bank’s growing optimism that solid domestic consumption will empower companies to hike prices and sustain inflation persistently around in its 2% goal in the coming years.

However, the sources said that the higher revision in itself was unlikely to resulting in a sudden rise in interest rates since many BOJ officials believed the need to carefully examine annual spring wages negotiations and also the effects of U.S. interest rate hikes.

One source noted that “price gains are spreading more than previously expected. A pattern that could persist if wages increase sharply.”

When one-time factors like govt subsidies are eliminate, average inflation tends to gain momentum.” Another source said, confirming by the third.

When making forecasts and developing policy, the BOJ has generally utilize core consumer inflation. Which does include energy prices but eliminates the impacts of fresh food.

However in order to better understand the broad price movement caused by domestic demand. It also started publishing projections for “core-core” consumer inflation in April. This approach takes out the effect of the both fresh food and energy prices.

The sources claimed that the BOJ was now focussed primarily on the core-core index in order to determine whether Japan can attain sustained price increases due to the govt fuel subsidies. And upcoming utility bill raises muddying this year’s price outlook.

The BOJ would likely increase its core-core inflation projections for the present financial year ending in Mar and fiscal 2023. They predicted, in new quarter forecasts due this month.

Depending on the board’s assessment of the probability of wage rise. It may also marginally increase the prediction for fiscal 2024, the sources said.


The upgrades will probably maintain market views that the central bank will gradually cease its ultra-loose policies while Governor Haruhiko Kuroda’s second 5 year ends in April. This would bring the estimate for core-core inflation close towards the BOJ’s target.

The board anticipated that the average level of core-core consumer price index current financial year would be 1.8% more than in fy 2021 in its most recent estimates, which were made in Oct. It projects growth with in index of 1.6% each of the following financial years 2023 and 2024.

Following a two day policy meeting which finishes on January 18, the BOJ will release the quarterly estimates.
In recent months, rising import costs for raw materials have driven inflation far above the BOJ’s target of 2%. Prospering where Kuroda’s 10 year stimulus programme had failed.

On the basis that the BOJ must continue to support the economy till the present cost-push inflation changes into demand driven one supported by higher wages. Kuroda has ruled out the possibility of the near term interest rate increase.

However, after the BOJ surprised markets last month by broadening the band around in its 10-year bond yield goal. A move investors perceived as a preparation toward a future rate hike, Japan’s long-term rates of interest have slowly increased.

Core consumer prices increased 3.7% compared to a year earlier in Nov. And economists forecast inflation to stay above the BOJ’s 2% target in the months ahead as businesses continue to pass along rising costs to consumers.

According to economists, wage growth will be crucial in determining whether Japan’s frail economy can take the blow from rising prices and permit the BOJ to start normalising monetary policy.