Tokyo, Oct. 28 (Jiji Press)–The Bank of Japan lowered its fiscal 2021 growth projection for the domestic economy on Thursday, in light of supply chain constraints and sluggish consumption this summer amid a resurgence of the coronavirus.
Japan’s gross domestic product in the year through March 2022 is expected to rise 3.4 pct from the previous year in price-adjusted real terms, weaker than the earlier forecast 3.8 pct, the BOJ said in a quarterly report released after its two-day policy-setting meeting.
At the meeting, the BOJ Policy Board voted to keep unchanged the central bank’s current monetary easing policy.
In the Outlook for Economic Activity and Prices report, the BOJ upgraded the fiscal 2022 growth projection to 2.9 pct from 2.7 pct.
Meanwhile, the bank slashed the fiscal 2021 inflation forecast to 0.0 pct from 0.6 pct, following a base-year change for the country’s core consumer price index, which amplified the effects of cheaper mobile phone rates.
The BOJ kept intact the fiscal 2022 and 2023 inflation projections, despite soaring crude oil prices, as well as the yen’s current weakening.
The ongoing price increases around the world are because “supply is not sufficiently keeping up with a rapid rise in demand amid economic reopening,” BOJ Governor Haruhiko Kuroda pointed out at a news conference following the policy meeting.
In Japan, inflation is “moderate, compared with overseas economies,” and the risk of a surge in inflation is “extremely limited,” Kuroda also said.
He noted that the Japanese economy is better prepared to respond to a demand recovery as jobs have been generally maintained in the country amid the coronavirus pandemic.
Shrugging off concerns about the yen’s recent rapid depreciation, the BOJ chief said the weaker yen is ” definitely positive on the whole” for the Japanese economy.
At the policy meeting, the BOJ maintained its basic assessment of the Japanese economy, saying it “has picked up as a trend, although it has remained in a severe situation due to the impact of COVID-19 at home and abroad.”
Exports and industrial production have been “weak recently due to the effects of supply-side constraints seen in some areas,” the BOJ said.
“Private consumption has shown signs of a pickup recently, although downward pressure has remained strong, particularly on services consumption, mainly due to vigilance against COVID-19,” the BOJ said.
The bank said the year-on-year pace of rise in the CPI is “expected to increase toward around the end of 2021, mainly due to the rise in energy prices reflecting the rise in crude oil prices.”