BOJ Cuts Inflation Forecasts

Tokyo, Oct. 31 (Jiji Press)--The Bank of Japan decided Wednesday to keep its current monetary easing policy unchanged while lowering its fiscal 2018 inflation and economic growth forecasts for the country. The BOJ will continue to impose an interest rate of minus 0.1 pct on part of financial institutions' current-account deposits at the central bank, the BOJ said in a statement issued after its two-day monetary policy meeting through the day. The bank will also keep purchasing long-term Japanese government bonds to guide 10-year JGB yields to around zero pct and allowing the yields to "move upward and downward to some extent." The decisions were made by a seven-to-two vote. "Consumer prices are expected to rise gradually toward the BOJ's 2 pct target although it will take longer to reach the level than earlier anticipated by the central bank," BOJ Governor Haruhiko Kuroda said at a press conference after the meeting. "Momentum for price increases has been maintained," Kuroda said, while showing concern about downside risks to the economy and prices. "A deflationary mindset among consumers has yet to be eliminated," the BOJ chief added. Meanwhile, Kuroda said, "The BOJ is not considering changing its policy of guiding the long-term JGB yields to around zero pct or expanding the allowable range of fluctuations of the yields." Among risk factors, Kuroda said he is giving most attention to the impact on the global economy of trade tensions between the United States and China. The Japanese economy is "expanding moderately," with the growth rate of the core consumer price index "likely to increase gradually" toward the target of 2 pct, the BOJ said in a quarterly economic and price outlook report released after the policy meeting. Still, the median growth forecast for the core CPI for fiscal 2018 among the board's members fell to 0.9 pct from 1.1 pct in the previous July report. The core CPI growth projection for fiscal 2019 also dropped, to 1.4 pct from 1.5 pct, and that for fiscal 2020 to 1.5 pct from 1.6 pct, excluding the impact of the planned consumption tax rate hike from the current 8 pct to 10 pct in October 2019. "The projected rates of increase in the CPI are somewhat lower, mainly for fiscal 2018," the BOJ said in the report. Also in the report, the BOJ expressed concern over "the consequences of protectionist moves and their effects," apparently referring to the escalating U.S.-China trade friction. The median growth forecast for Japan's real gross domestic product for fiscal 2018 stood at 1.4 pct in the latest outlook report, compared with the previous estimate of 1.5 pct. The BOJ discussed in the report possible side effects of the low interest rate environment in the country. "Prolonged downward pressure on financial institutions' profits" amid the low rate environment and severe competition may create a risk of "destabilizing the financial system," the bank said. "It is necessary to pay close attention to future developments." END