The Bank of Japan (BOJ) yesterday boosted its inflation and economic growth projections for the world’s third-largest economy as it eyes an end to years of deflation.
The report, which came as the BOJ stood pat on new policy measures, estimated 2.9 percent growth in the economy for the fiscal year to March, up from an earlier 2.3 percent projection made in January. It also tipped inflation to hit 0.7 percent, also up from an earlier 0.4 percent projection.
Earlier yesterday, data showed Japan’s core consumer prices, which exclude volatile prices of fresh food, fell 0.5 percent year-on-year last month, highlighting the tough task ahead for the bank and the government.
“Japan’s economy has stopped weakening and has shown some signs of picking up,” the BOJ said in its report, pointing at a likely rise in business investment and private spending as consumer sentiment improves.
The bank said there was also likely to be a spike in demand ahead of a tax increase later in the year. Japan’s sales tax is set to double to 10 percent by 2015, as Tokyo tries to pay down a huge national debt as social security costs soar due to a rapidly aging population.
The bank also held off announcing any new policy measures as it wrapped up its first meeting since unveiling a huge stimulus package this month aimed at stoking the economy and beating years of deflation.
The news from the BOJ came after the stock market closed. Traders had expected the Bank of Japan’s decision to stand pat on any new policy measures, while Japanese chief Cabinet Secretary Yoshihide Suga told reporters that the government still intends to undertake “fiscal rehabilitation.”
However, he said the government might need to reassess how quickly it could reduce its deficit spending.
The benchmark Nikkei 225 index closed down 0.3 percent, or 41.95 points, at 13,884.13, while the TOPIX of all first-section issues fell 0.99 percent, or 11.59 points, to 1,161.19.