The Bank of Japan will consider lowering its outlook for the consumer price index for the next fiscal year starting April as plunging oil prices are curbing overall price increases, sources close to the matter said Wednesday.
At a two-day policy meeting from next Tuesday, BOJ policy board members are set to review their current projection of 1.7 percent growth for the core CPI, which excludes volatile fresh food prices, for fiscal 2015, as part of a full reassessment of the bank's price and economic forecasts covering the three years to March 2017.
The central bank is expected to discuss a cut in the forecast for the rise in the core CPI to the lower half of the 1 percent range from the present outlook outlined on Oct. 31, as crude oil futures have plummeted 44 percent since then, the sources said.
The pace of price increases slowed for the fourth consecutive month in November when the core CPI rose 0.7 percent from a year earlier, excluding the impact of 3-percentage-point consumption tax hike in April. The BOJ estimates the tax increase has pushed the inflation rate up by about 2 percentage points.
Some economists estimate the CPI growth will shrink further to zero percent or even below that level around the beginning of the new fiscal year in April due to declines in energy costs.
But many BOJ policy members are cautious about taking additional easing steps as they believe the underlying trend of price rises remains intact and they expect a slide in oil prices to have only a short-term impact, the sources said.
At a monetary policy meeting on Oct. 31, the policy board decided to expand the bank's ultraloose monetary policy due to concerns that Japan might remain in a deflationary mindset, not because of a drop in oil prices.
The central bank is watching closely crucial annual wage talks that will start soon before it makes its next move, hoping prices will gain a solid uptrend through consumer spending sparked by pay hikes, the sources said.
Increasing moves of price hikes by companies are also supporting the bank's view that Japan is moving toward the end of deflation, they said.
The BOJ is expected to maintain an inflation rate target of 2 percent by March 2016, excluding the effect of the consumption tax hike. |
