Japan's central bank hiked its full-year inflation forecast on Thursday but cautioned that it sees rising prices, driven by a surge in commodity costs cause 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 percent -- sharply up from its previous 1.1 percent forecast.
The figure, which excludes fresh food, is just below the bank's longstanding two-percent 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 two percent -- 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 priceindex) is likely to wane."
In March, core consumer prices rose 0.8 percent -- the fastest increase in more than two years -- as oil prices soared. Excluding energy, however, prices were down 0.7 percent, reflecting what the bank says is the need for continued effort to achieve a sustainable cycle of dynamic economic growth that stimulates demand.
On Thursday, the bank's policymakers left their inflation forecast for 2023-24 unchanged at 1.1 percent.
The BoJ said it now expects the economy to grow 2.9 percent in the current fiscal year, against its previous forecast of 3.8 percent. But it also predicted 1.9 percent expansion in 2023-24, from its previous projection of 1.1 percent.
The changes were down to factors including "a resurgence of Covid-19, the
rise in commodity prices and a slowdown in overseas economies", the bank said.
