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By Leika Kihara and Takahiko Wada
TOKYO (Reuters) – The Bank of Japan is expected to slightly revise its inflation forecast for April due to rising energy costs, although new forecasts will keep price growth below the 2% target, sources said.
As the price of fuel and commodity costs rises, the council is likely to project inflation of more than 1% next year, according to five sources familiar with the BOJ’s thinking.
In other words, compared to the last forecast in October, consumer inflation accelerated to 0.9% in 2022, after flat growth at the current fiscal end of March.
“While energy costs are a major driver of rising inflation, there are signs that more companies are starting to raise prices,” said one source. Sources spoke on condition of anonymity because they are not allowed to speak publicly.
The BOJ will make new quarterly forecasts at its next policy meeting on Jan. 17-18.
Relieving supply constraints and an expected boost in the government’s stimulus package could also lead to improved growth projections for the BOJ’s next fiscal year, sources said.
The nine-member council now expects the economy to grow by 2.9% next year, after expanding by 3.4% this year.
These upward revisions are unlikely to push the BOJ to reduce the massive stimulus, as inflation is far from the 2% target, sources said.
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