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Tokyo - The Bank of Japan (BoJ) postponed its forecast for reaching its 2% target, saying that the timing of hitting that goal depends on oil prices. The bank earlier kept its monetary policy unchanged.
The bank’s board now sees prices rising 0.1% this fiscal year, down from 0.7%, and 1.4% next year. Until today, the bank had said it saw inflation rising to meet the target around the six months through September 2016. This has now been pushed back to the six months through March 2017.
Kuroda has maintained that the bank won’t hesitate to adjust policy if there are threats to the price trend. In it’s statement on Friday, the bank said that risks to that outlook for the economy and prices are skewed to the downside.
The bank earlier released a statement after its meeting Friday showing that the board voted 8 to 1 to continue expanding the monetary base at an annual pace of ¥80trn.
Economists were split on the likelihood of an increase in the BoJ’s already record asset purchases, while government officials and the finance minister had talked down the need for more stimulus.
“I don’t think this is the end - expectations for easing will be carried over to coming months,” said Daiju Aoki, an economist at UBS Securities Japan, who forecast the BoJ would add stimulus today.
“The BoJ risked putting itself behind the curve by not acting today. Kuroda had been preemptive to address emerging risks but now they are becoming reactive.”
Data earlier Friday showed the BOJ’s key price gauge, which strips out food costs, dropped for a second straight month. After removing both food and energy, prices climbed 0.9% in September.
JPMorgan and Mitsubishi UFJ Morgan Stanley Securities are among those expecting the BoJ to cut its inflation forecasts when it releases its outlook report later on Friday.
Economists also have speculated that the central bank may need to push back its date for reaching 2% inflation, which currently runs through September 2016.
Cutting inflation forecasts
Recent economic data were mixed. Retail sales unexpectedly dropped in September, exports rose and a report Thursday showed industrial production increased 1%, more than economists projected.
The BoJ’s decision comes after the US Federal Reserve indicated Thursday that December is still a possibility for its first rate increase since 2006 as it softened its language on global economic risks.
It wouldn’t be the first time for the BoJ to leave policy unchanged while trimming its price forecasts and pushing out the timing of reaching the 2% goal, should the outlook report confirm such changes later on Friday. It did much the same thing in April, when Kuroda mainly attributed the delay to lower oil prices.
