The Bank of Japan (BOJ) will raise its inflation forecast for this fiscal year to above 2.5% at its next policy meeting as a weakening yen and higher raw material costs drive up prices, the Kyodo news agency cited sources as saying on Monday.
While the upgrade will bring inflation more firmly above the central bank's 2% target, the policy board of the BOJ was likely to keep ultra-loose monetary policy in place to support Japan's economy, Kyodo said.
In quarterly projections due to be released at the conclusion of the Oct. 27-28 policy-setting meeting, the BOJ would likely increase its core consumer inflation forecast for the fiscal year through March 2023 to above 2.5% from the current estimate of a 2.3% rise, Kyodo reported.
While consumer inflation has exceeded the BOJ's target, central bank Governor Haruhiko Kuroda has characterised recent inflation as being cost-push, emphasising it must be accompanied by stronger wage growth to consider altering the ultra-easy policy. Consumer inflation is expected to fall short of the central bank's target in the next fiscal year, Kuroda, whose term ends in April next year, told parliament on Monday.
The government is facing growing pressure to offset the hit households and businesses are taking from price rises that are being made worse by a slide in the yen, which has lost about 22% against the U.S. dollar this year.
Masakazu Tokura, the head of Japan's biggest business lobby, told reporters on Monday that consumers and firms are facing difficulty due to the weakening yen, which has driven up the cost of everything from fuel to food.
