Bank of Japan cuts inflation, economic growth forecasts

Japanese inflation currently stands below one percent, less than halfway to target, despite six years of aggressive monetary stimulus. (AFP)
Updated 25 April 2019
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Bank of Japan cuts inflation, economic growth forecasts

  • The Bank of Japan revised down 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

TOKYO: Japan will fail to reach 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 revised down 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.
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.
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 program and how he intends to return the bank’s policy to normal.
In 2013, the BoJ embarked on a huge bond-buying program 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.
Kuroda is due to speak later Thursday.


UK inflation rises in April by less than Bank of England expected

Updated 22 May 2019
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UK inflation rises in April by less than Bank of England expected

  • Consumer prices rose at an annual rate of 2.1 percent in April after a 1.9 percent increase in March
  • Electricity and gas prices were the biggest driver of inflation last month

LONDON: British inflation rose last month by less than the Bank of England and investors had expected, but still hit its highest level this year, pushed up by a rise in energy bills.
Consumer prices rose at an annual rate of 2.1 percent in April after a 1.9 percent increase in March, the Office for National Statistics said on Wednesday. A Reuters poll of economists had pointed to a rate of 2.2 percent, the same as the BoE’s forecast.
Sterling and government bonds were little changed by the data as core inflation, which excludes energy and food prices, held steady at 1.8 percent for the third month in a row.
“In principle, this is another reason to think the Bank of England will keep rates on hold for the foreseeable future,” ING economist James Smith said.
But he added that a strong labor market meant an interest rate hike in November could not be ruled out.
A recent weakening of inflation, combined with the lowest unemployment rate in 44 years and rising wages, has taken the edge off the uncertainty about Brexit for many households whose spending drives Britain’s economy.
But Britain’s energy regulator raised a price cap on energy providers by 10 percent with effect from April, and all big six suppliers raised their standard prices by the same amount, which the BoE said would push inflation above target briefly.
Electricity and gas prices were the biggest driver of inflation last month, the ONS said.
Computer game and package holiday prices helped to offset the impact of the higher bills.
The ONS figures also suggested less short-term pressure in the pipeline for consumer prices than expected.
Manufacturers’ costs for raw materials — many of them imported — were 3.8 percent higher than in April 2018, much less than the 4.5 percent rise predicted by the Reuters poll.
The ONS said house prices in March rose by an annual 1.4 percent across the United Kingdom as a whole compared with 1.0 percent in February, marking the first increase in house price inflation since September.
Prices in London alone fell by 1.9 percent, a smaller drop than in February.
The ONS also revised down its estimate for Britain’s budget deficit in the last 2018/19 financial year that ended in March.
The headline measure of public sector net borrowing amounted to £23.5 billion ($29.8 billion) that year or 1.1 percent of gross domestic product, compared with the previous estimate of £24.7 billion or 1.2 percent of GDP.
In April, the first year of the 2019/20 financial year, the deficit stood at £5.8 billion, as expected by economists.