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For Japan’s fiscal year starting this April, the Bank of Japan (BOJ) has raised its inflation expectation from 0.9 percent to 1.1 percent.
Also, for the first time since 2014, the bank altered its view of inflationary risk from “skewed to the downside” to “generally balanced.”
Japan’s wholesale prices rose at 8 to 9 percent in November and December; companies are beginning to pass those costs through to consumers., the Financial Times reported.
Since the bank’s previous assessment in October, prices have been pushed higher by rising energy costs and a weaker yen.
However, the BOJ chose to make no changes to its asset purchase plan or to its -0.1-percent short-term interest rate.
Although Japan’s inflation rate remains far below that in much of the rest of the world, expectations had grown that the bank would take a more aggressive stance toward price growth.
As a result, the BOJ’s announcement sent the yen’s value falling below ¥115 to the dollar, at one point nearing a five-year low.
TREND FORECAST: Since the Panic of ’08, Japan has edged in and out of recession. Since 2016, its central bank has kept interest rates negative and has artificially propped up equity markets with the massive bond and stock buying schemes.
Japan’s economy will remain weak as the global economy continues to slow down. Also, Japan’s largest source of energy is almost 100 percent imported. Thus, the higher oil and gas prices rise, the higher inflation will rise… and the deeper its economy will sink.