TOKYO: Japan will fail to hit its two percent inflation target even by 2022, the central bank predicted on Thursday as it also revised down its estimate for growth in the world’s third-largest economy.
In its closely watched quarterly report, the Bank of Japan forecast inflation of 1.6 percent in the fiscal year ending March 2022, meaning its years-long battle to reignite prices is far from won.
The BoJ lowered its inflation forecast for the year to March 2021 to 1.3 percent from 1.4 percent.
Japanese inflation currently stands below one percent, less than halfway to target, despite six years of aggressive monetary stimulus under BoJ Governor Haruhiko Kuroda.
The central bank kept its ultra-loose monetary policy in place after a two-day policy board meeting but added a fresh timeframe, saying the “extremely low” rates would be maintained “at least through around spring 2020”.
It cited global economic uncertainties and the risks of a scheduled hike in consumption tax later this year from eight percent to 10 percent.
“It is extremely regrettable that we have not reached the two percent inflation target six years after January 2013” when the government and the BoJ agreed on the target, Kuroda told a press conference.
He said the current monetary easing “could continue beyond” spring 2020, and future policy decisions will be made taking into account economic indicators and other conditions.
Kuroda said the new timeframe was intended to show the cheap money policy will continue for “longer than you think”, also noting that global economic uncertainties were also a factor behind clarifying the bank’s intentions.
But he insisted the economy is moving gradually toward the inflation target, given a tight labour market and “relatively good” economic conditions.
Economic growth would also come in at 0.8 percent this fiscal year, climbing to 0.9 percent the year after — both downward revisions of 0.1 percentage points, the central bank said in the latest report.
It forecast GDP at 1.2 percent in the fiscal year ending in 2022.
Kuroda has come under fire over the effectiveness of his monetary easing programme and how he intends to return the bank’s policy to normal.
In 2013, the BoJ embarked on a huge bond-buying programme in a bid to stimulate long-dormant prices with the stated aim of hitting the two percent mark within two years.
But while the plan – which ran in tandem with Prime Minister Shinzo Abe’s big-spending drive to ramp up the economy — showed early promise, the bank has been forced to delay several times the date for hitting its target.
In January, Kuroda was forced to revise down the BoJ’s inflation forecasts, a step seen as further evidence that authorities are unable to boost prices.
Other central banks have been gradually taking more guarded views on the global economy, with minutes of the US Federal Reserve’s policy meeting last month showing board members split between optimism and caution.- AFP