The Bank of Japan will likely cut next fiscal year’s inflation forecast only slightly and largely maintain its upbeat projection for fiscal 2018 at a policy review next week, sources said, an outlook which could allow it to argue that there is no need for imminent monetary easing, Reuters reported. While falling import costs from a strong yen and weak consumption will weigh on inflation, such risks will be tempered by a boost to growth from an anticipated fiscal stimulus package and a delay in next year’s sales tax hike, sources familiar with the bank’s thinking said. Prime Minister Shinzo Abe has said the government will announce a large spending package by the end of this month. “The boost from an expansionary fiscal policy suggests any downgrade to the BoJ’s inflation forecast won’t be too big,” said one of the sources. The BoJ now expects core consumer inflation to hit 1.7% in the next fiscal year beginning in April 2017, far above private forecasts of 0.8%.
