TOKYO (Reuters) – The Bank of Japan, in its “Outlook for Economic and Price Conditions” (Outlook Report) released on the 26th, forecasts that the underlying rate of increase in consumer prices will gradually increase in the second half of the outlook period. expressed the view that “inflation will continue at a level that is generally consistent with the price stability goal.”
The year-on-year rate of change in the Consumer Price Index (excluding fresh food, core CPI) is expected to be in the high 2% range in fiscal 2024, and then in fiscal 2025 and fiscal 2026, it is “expected to remain at around 2%.” While the impact of price pass-through caused by rising import prices will diminish, the impact of rising crude oil prices and the backlash from the government’s economic measures are expected to push up the year-on-year rate through fiscal 2025.
The Bank of Japan expects the year-on-year rate of increase in core CPI for fiscal 2024 to be 2.8% (median), up from the previous year’s 2.4%. The rate for FY2017 has been revised upward from 1.8% to 1.9%. The forecast for fiscal 2017, which was announced for the first time, is 1.9%.
The forecast for the rate of increase in the CPI excluding fresh food and energy, which better reflects the underlying trend in prices, remains unchanged at 1.9% from the previous forecast for both fiscal 2024 and fiscal 2025. In FY2016, it was 2.1%.
It cited factors such as trends in overseas economies and prices and resource prices, and corporate wage and price setting behavior as risks to the outlook for the economy and prices, and pointed out that uncertainties surrounding the economy and prices remain high. “We need to pay close attention to trends in the financial and foreign exchange markets and their impact on Japan’s economy and prices,” he said.
Regarding the risk balance regarding the outlook for prices, although the upside risk is greater in fiscal 2019, the balance has been generally upward or downward since then. Regarding the economic outlook, it is said that the outlook has been generally balanced between the top and bottom since fiscal 2024.
The rate of increase in wages is expected to increase as a trend, reflecting the rise in prices, and employee income is expected to continue increasing.
As in the previous case, risk factors specific to prices include, firstly, corporate wage and price setting behavior, and secondly, future exchange rate fluctuations, trends in international commodity prices, and their impact on import prices and domestic prices. And so.
*[Table]Outlook report: Economic and price outlook
Kentaro Sugiyama Edit: Shiho Tanaka
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