The Bank of Japan (BoJ) decided this Thursday to keep rates unchanged, at 0.75%, as the market expected, in a decision adopted by a majority (8 votes in favor and one against). The Japanese monetary authority considers that the country’s economy continues to show a moderate recovery, although with signs of weakness in some sectors. Specifically, it stands out that exports and industrial production remain practically stagnant, while private consumption appears resilient thanks to the improvement in employment and income, despite the impact of inflation. Regarding prices, the BoJ points out that core inflation (CPI without fresh food) is around 2% after having previously exceeded that level, partly due to the rise in food prices, although it has recently moderated due to government measures to alleviate the cost of energy. Even so, inflation expectations have continued to rise gradually. Looking ahead, the central bank expects the Japanese economy to continue growing moderately, supported by the global recovery and the strengthening of the cycle between income and spending. However, it warns that the recent increase in tensions in the Middle East has caused volatility in the markets and a strong rebound in oil, factors that could alter this scenario. In this sense, the agency anticipates that inflation could temporarily slow down below 2%, before rebounding again, driven, among other factors, by the rise in crude oil prices. In the medium term, it expects core inflation to gradually converge towards the 2% target.
RISKS AND PROSPECTS
The BoJ identifies as the main risks the evolution of the conflict in the Middle East, the behavior of oil prices, the situation of global economies, as well as the evolution of financial markets and the exchange rate. Regarding its strategy, the central bank reiterates that, given that real rates remain at very low levels, it will continue to gradually raise the price of money if its economic and inflation forecasts are met. All this with the objective of achieving sustainable price stability of around 2%.
