Developments in FX rates, international commodity prices seen as risk to prices

The Bank of Japan’s (BOJ) quarterly outlook report underscored risks to the Japanese economy and prices, in the face of global inflation and FX market developments.

Key takeaways

Japan’s economy likely to recover as impact of pandemic, supply constraints subsides.

Uncertainty regarding Japan’s economy extremely high.

Risks to price outlook skewed to upside.

Risks to economic outlook skewed to downside.

Must be vigilant to financial, currency market moves and their impact on japan’s economy, prices.

Japan’s economy is picking up.

Japan’s inflation expectations heightening.

Consumption increasing moderately.

Japan’s core consumer inflation moving around 3% due to rising energy, food, durable goods prices.

Overseas economies showing signs of slowdown due to global inflationary pressure, central banks’ interest rate hikes.

Japan’s economy to recover due to expected rise in pent-up demand, despite headwinds from overseas economic slowdown.

Corporate profits likely to remain at high levels due to pent-up demand, positive effect of weak yen.

Core consumer inflation likely to slow pace of increase toward middle of next fiscal year.

Japan’s output gap to turn positive around latter half of fiscal 2022.

Underlying rise in inflation likely to heighten medium-, long-term inflation expectations and lead to sustained rise in inflation accompanied by wage gains.

Boj will review etf buying.

Must pay due attention to developments in financial, FX markets and their impact on Japan’s economy, prices.

On risks: developments in FX rates, international commodity prices seen as risk to prices.

On risks: in baseline scenario, it’s expected that global inflation rates will decline gradually and that overseas economies will continue to grow moderately.

On risks: vigilance against a wage-price spiral has heightened mainly in advanced economies.

On risks: there’s concern in global financial and capital markets over whether it’s possible to contain inflation and maintain economic growth simultaneously.

Inflation to gradually accelerate pace of increase as a trend.

Starting Dec 1, BOJ will buy ETFs at lowest trust commission fees.

Board’s core-core CPI median forecast for fiscal 2022 at +1.8 vs +1.3% in July.

Board’s core-core CPI median forecast for fiscal 2023 at +1.6%vs +1.4% in July.

Board’s core-core CPI median forecast for fiscal 2024 at +1.6% vs +1.5% in July.