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Bloomberg
The Bank of Japan left monetary policy unchanged as it cut its inflation outlook once again, underscoring how far away its price target is and how few options the central bank has for drawing closer.
The BOJ maintained its yield curve-control program and asset purchases, it said in a statement on Wednesday, a result predicted by all but one of 50 economists surveyed by Bloomberg. The bank lowered its inflation forecast for a fourth consecutive time in its quarterly outlook report.
With the European Central Bank meeting on Thursday and the Federal Reserve next week, the gap between the BOJ and its global peers keeps widening. While the Fed may hit pause soon, both it and ECB are seeking to return to pre-crisis policies, giving them more room to respond to another shock or downturn.
The BOJ’s inaction even as it cut its inflation forecasts was “strong proof†that it has few tools left at its disposal, said Shinichiro Kobayashi, senior economist at Mitsubishi UFJ Research and Consulting. He noted that the central bank had previously taken preemptive action when inflation had been deemed at risk.
In its outlook report, the BOJ cut its inflation forecast for the fiscal year starting in April to 0.9 percent from 1.4 percent, citing lower oil prices as the primary reason.
But the BOJ’s inflation forecasts didn’t include the effects of expected cuts to cell phone fees or a government initiative to provide free education for young children. The central bank said the education policy alone would cut another 0.3 percentage point from core inflation in fiscal 2019 and 0.4 percentage point the next year — effectively bringing its forecasts to 0.6 percent and 1.0 percent, respectively.
A downgrade to 0.6 percent in fiscal 2019 would have been the biggest since Governor Haruhiko Kuroda took over the BOJ in 2013.