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BOJ Trims Growth Prediction

BOJ Trims Growth PredictionBOJ Trims Growth Prediction

Japan’s central bank on Wednesday cut its annual growth and inflation forecasts for the world’s third-largest economy, with analysts warning weaknesses remained and the downgrade hinted at a disappointing second quarter.

After a two-day policy meeting, the Bank of Japan said Japan’s economy would expand 1.7% in the fiscal year to March 2016 while inflation would come in at 0.7%, That was down from 2% and 0.8% respectively, estimated earlier this year,

AFP reported.

While the bank kept up its view that Japan’s economy was “expected to continue recovering moderately”, it acknowledged that a pickup in exports and industrial production had seen “some fluctuations”.

Hideo Kumano, senior economist at Dai-ichi Life Research Institute, said trimming the growth forecasts “probably means growth in the April-June quarter was not very good”. Official second-quarter GDP data are due next month.

BOJ policymakers have been scaling back their expectations and governor Haruhiko Kuroda has conceded that an ambitious 2% inflation target was still some way off. Kuroda will hold a regular post-meeting news briefing later Wednesday.

The economy expanded 1% in January-March after limping out of recession in the last three months of 2014, and business confidence remains strong.

But consumer spending has struggled after a sales tax rise last year and economists widely expect the BOJ to ramp up its easing program, likely later this year, to bring Japan closer to its inflation target.

The target is a cornerstone of Prime Minister Shinzo Abe’s drive to conquer years of stagnant or falling prices and revive the economy.

On Wednesday, the BOJ stood pat on its record asset-purchase program, which is pumping about ¥80 trillion ($648 billion) into the financial system annually to jack up prices and kickstart growth.

 

Financialtribune.com