Japan’s government is expected to cut its consumer inflation forecast for the current fiscal year and produce an estimate for fiscal 2017 that is much lower than the central bank’s 2 percent target, government sources told Reuters on Tuesday.
The gloomy government assessment may add to market doubts over the Bank of Japan’s optimistic price forecasts and step up pressure on the central bank to expand stimulus this month as it struggles to fend off deflationary risks.
In draft forecasts to be finalised at a cabinet meeting on Wednesday, the government projects consumer inflation of 0.4 percent for the current fiscal year ending in March 2017, down from 1.2 percent projected in January, the sources said.
The downgrade likely reflects weaker-than-expected economic growth and the impact of external factors such as slumping oil prices and the strong yen, which is pushing down import costs.
Sources said the government projects consumer inflation of 1.4 percent for fiscal 2017, well below the 2 percent target the BOJ says will be met during that year.