Bank of Japan Hikes Inflation Forecast on Soaring Energy Prices

Japan's central bank hiked its full-year inflation forecast on Thursday (Apr 28) but cautioned that it sees rising prices, driven by a surge in commodity costs caused by the Ukraine war, as a volatile and temporary trend.

Despite climbing prices and a slump in the yen to a 20-year low against the dollar, the Bank of Japan left its ultra-loose monetary policy unchanged.

The bank revised upwards its inflation projection for the 2022-23 financial year to 1.9 per cent - sharply up from its previous 1.1 per cent forecast.

The figure, which excludes fresh food, is just below the bank's longstanding 2 per cent target but the BoJ saw the rises as unsustainable and is calling for continued effort to achieve a sustainable cycle of dynamic economic growth.

Consumer prices are "likely to increase temporarily to around 2 per cent - due to the impact of a significant rise in energy prices - in fiscal 2022", it said Thursday.

"However, the rate of increase is expected to decelerate, because the positive contribution of the rise in energy prices to the CPI (consumer price index) is likely to wane."

In March, core consumer prices rose 0.8 per cent - the fastest increase in more than two years - as oil prices soared.

Excluding energy, however, prices were down 0.7 per cent, reflecting what the bank says is the need for continued effort to achieve a sustainable cycle of dynamic economic growth that stimulates demand._AFP