Tokyo (dpa) – The Bank of Japan Friday cut its inflation outlook for this year, moving further away from its stated target as the economy struggles to overcome more than a decade of deflationary pressure.
The central bank said it expects the consumer price index to inch up just 0.1 per cent for the financial year to the end of March 2016. This is down sharply from the 0.7 per cent predicted three months ago, and further below the 2-per-cent target it set in April 2013.
The bank said the inflation rate would likely rise 1.4 per cent in the next financial year through March 2017, down from 1.9 per cent estimated in July.
“Although the timing of reaching around 2 per cent depends on developments in crude oil prices, it is projected to be around the second half of fiscal 2016, assuming that crude oil prices will rise moderately from the recent level,” the bank said in a statement.
The move comes after official figures showed that the country’s consumer prices fell 0.1 per cent from a year earlier in September for the second straight month of decline, according to the Ministry of Internal Affairs and Communications.
The central bank decided earlier in the day to hold off on additional monetary-easing steps despite growing pressure to do so amid sluggish domestic spending and an economic slowdown in China and emerging economies.
The Japanese economy shrank at an annual rate of 1.2 per cent in the April-to-June period.
The bank expects the economy will expand 1.2 per cent in the current financial year and 1.4 per cent in the next financial year, revised down from July estimates of 1.7-per-cent growth and 1.5-per-cent expansion, respectively.
The bank is already in the midst of an aggressive monetary-easing programme, but the bank’s governor Haruhiko Kuroda has said there was no immediate need to extend it further.
The government also reported Friday that the country’s household spending fell 0.4 per cent from a year earlier in September for the first time in two months.
Inflation-adjusted monthly wages dropped 1.6 per cent from a year earlier in September to 415,467 yen (3,462 dollars) despite improved corporate earnings, the government said. The reading represented the first fall in six months.