TOKYO- The Bank of Japan is expected this month to broadly maintain its projection that trend inflation will stay near its 2 percent target in coming years, despite global economic uncertainties and soft consumption, say sources familiar with its thinking.
The projection will be part of the bank’s quarterly outlook report due at its next rate review on Jan. 22-23, when the board is widely expected to keep ultra-loose policy settings unchanged.
Any such forecast will likely underscore the BOJ’s cautious optimism that the economy was making steady progress towards sustainably achieving its 2 percent inflation target – a prerequisite for pulling short-term interest rates out of negative territory.
The BOJ has maintained its short-term interest rate target at -0.1 percent and the 10-year bond yield target around 0 percent since 2016.
“Consumption is holding up and there’s growing conviction that wage hikes will continue, and even broaden, this year,” one source said.
“The broad uptrend in inflation and wages remains intact,” said another source, a view echoed by three other people.
In the quarterly outlook report, the nine-member board releases a median projection on economic growth, core consumer inflation that strips away the effect of volatile fresh food prices, and “core core” inflation, which also excludes fuel costs.
