Breaking News
Close
Investing Pro 0
NEW! Get Actionable Insights with InvestingPro+ Try 7 Days Free

BOJ Stands Pat, Changes Long-Held View on Inflation Risks

EconomyJan 18, 2022 04:38
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters.

(Bloomberg) -- The Bank of Japan stood pat on policy and adjusted its view of inflation risks for the first time since 2014 in a move that suggests the economy is not entirely immune to the price forces prompting other major central banks to pull back pandemic stimulus.

The BOJ kept its negative interest rate, bond yield target and asset purchases unchanged at the end of its meeting Tuesday, a widely forecast decision given an overall inflation pulse that remains far weaker than in the U.S. and other major economies.

Still, with energy costs surging, the bank nudged up its forecasts for prices in the year starting in April and the following year, and changed its view of the inflation risks they face. The adjustment, also widely expected, signals that the bank now sees the possibility of inflation outstripping their projections, not just undershooting them.

The moves show that the global wave of inflation prompting action from the Federal Reserve and the Bank of England has also reached Japan’s shores, albeit with less impact so far.

Instead of a surge in prices across the board, inflation in Japan remains limited to specific items such as fuel and cooking essentials as companies continue to absorb the fastest rising costs in decades rather than risk losing business with higher price tags.

That means the extraordinary stimulus the BOJ has been pumping into the economy since well before the pandemic is likely to continue for now. 

The yen weakened against the dollar to briefly reach 114.83 from 114.53 immediately before the decision. The move suggests investors viewed the overall outcome as indicating BOJ policy will continue on a path of divergence from the Fed. 

In its quarterly outlook report, the BOJ raised its projections for the next two fiscal years, but still didn’t see inflation near its 2% target anytime in a projection period that ends in early 2024, about a year after Haruhiko Kuroda is set to retire as the bank’s governor.

For the 12 months starting in April, the bank said it now sees inflation of 1.1%, up from the 0.9% it projected three months ago. In the year after that, it sees inflation staying around 1.1%.

The quarterly forecasts show that the BOJ still doesn’t see the kind of price gains seen overseas for years to come.

Still, the bank’s changed stance on inflation risks indicates it is more open to the possibility that prices could rise at a faster-than-expected pace, an outcome that has been repeatedly seen elsewhere in the world.

 

The BOJ’s decision comes amid a sharp surge in omicron cases that poses a new risk to Japan’s economy, at least in the short term. 

While case counts and fatalities are still low compared with the U.S. and elsewhere, Prime Minister Fumio Kishida’s government is reportedly weighing whether to place Tokyo and neighboring prefectures under a quasi-state of emergency to impose stricter Covid-19 measures.

Reflecting a delay in Japan’s recovery, the BOJ cut its growth forecast for the current fiscal year ending March, while raising next year’s projection.

 

(Adds market reaction and more details from report.)

©2022 Bloomberg L.P.

BOJ Stands Pat, Changes Long-Held View on Inflation Risks
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Our Apps
DOWNLOAD APPApp store
Investing.com
© 2007-2022 Fusion Media Limited. All Rights Reserved.
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
  • Sign up for FREE and get:
  • Real-Time Alerts
  • Advanced Portfolio Features
  • Personalized Charts
  • Fully-Synced App
Continue with Google
or
Sign up with Email