The Bank of Japan has lowered its inflation forecasts with consumer price inflation for all items less fresh food dropping from 1 per cent to 0.8 per cent for the fiscal year 2015.
In its Outlook for Economic Activity and Prices, the Bank of Japan also trimmed its CPI forecast for the fiscal year 2016, which ends March 31 2017, from 2.2 per cent to 2 per cent, which the Bank described as “somewhat lower” than its predictions in January 2015. This means while it will still meet its price stability target, it will be later than originally expected.
The Bank stated: “Although the timing of reaching around 2 per cent depends on developments in crude oil prices, it is projected to be around the first half of fiscal 2016, assuming that crude oil prices will rise moderately from the recent level. Thereafter, Japan’s economy is expected to gradually shift to a growth path that sustains such inflation in a stable manner.”
In addition the bank, which kept its quantitative easing programme unchanged, also reduced its Real GDP growth forecasts by 0.1 percentage points to 2 per cent for the fiscal year 2015 and 1.5 per cent for the fiscal year 2016.
The statement had a mixed effect on markets, with the Topix index closing 0.45 per cent lower, and the Hang Seng index in Hong Kong slipping 0.94 per cent, although the Nikkei 225 index stayed reasonably stable with a 0.06 per cent gain.
European markets were also a mixed bag in early trading, as the FTSE 100 and FTSE Eurofirst300 indices both moved lower with drops of 0.54 per cent and 0.24 per cent respectively, although France’s Cac 40 index gained 0.14 per cent and the Dax index in Germany added 0.18 per cent.
