The Bank of Japan is considering forecasting consumer prices will rise by around 2 percent in fiscal 2025 from a year earlier in its next price outlook report, to be released after a policy-setting meeting later this month, sources familiar with the matter said Tuesday.
If the tentative forecast is correct, the BOJ will see its 2 percent inflation target achieved about three years after academic Kazuo Ueda became governor. The policy-setting meeting, set to last two days and the first under the new leadership, will take place from April 27.
Excluding volatile fresh food items, Japan's core consumer price index has remained above 2 percent for nearly a year, but the central bank takes the view that its inflation target is yet to be achieved stably because most of the gains seen are attributable to the temporary effects of higher import costs, not strong domestic demand.
The BOJ also considers more robust wage growth to be vital in achieving the inflation target, something that Ueda's predecessor Haruhiko Kuroda did not achieve during his 10-year tenure that ended earlier this month.
In the latest outlook report released in January, the BOJ expected core consumer prices to gain by 1.6 percent in fiscal 2023 starting in April, followed by 1.8 percent in fiscal 2024.
Financial markets expect the BOJ to make changes at some point to its program to keep borrowing costs low for businesses and households. It currently sets short-term interest rates at minus 0.1 percent and guides 10-year Japanese government bond yields to around zero percent.
Ueda has underlined the need to retain its policy of monetary easing, as Japan will likely see its inflation rate undershoot the BOJ's target in fiscal 2023.
During his inaugural press conference after taking up the post on April 9, Ueda pointed to "good" signs of trend inflation picking up and wage growth accelerating, saying that there is a possibility that the inflation goal can be achieved stably and sustainably.
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