The Bank of Japan looks increasingly likely to cut its inflation forecasts next month, sources say, making its target of 2 percent in the year from April look ever more ambitious, just three months after it eased monetary policy to keep the goal in sight.
The BOJ surprised markets on Oct. 31 with its decision to flood the market with cash to counter the effect of slumping oil prices and weak domestic demand on inflation expectations, but oil prices have fallen 15 percent since then.
Some central bankers now fear core consumer inflation will slow to about 0.5 percent by the middle of next year as gasoline and electricity bills fall, down from May’s peak of 1.4 percent and far below the 2 percent target BOJ Governor Haruhiko Kuroda has committed to achieve.
Oil price falls are helpful for Prime Minister Shinzo Abe’s “Abenomics” policies, which are aimed at reinflating the economy, as households and companies pay less for fuel imports, but make it harder for the BOJ to lift Japan clear of two decades of crippling deflation.
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