BOJ Ready to Raise Japan's Economic Forecast
The Bank of Japan (BOJ) is expected to consider raising its growth forecast for Japan at its policy meeting this month. However, the central bank is likely to maintain its benchmark interest rate after previously raising it to its highest level since 1995.
The BOJ is said to be discussing the possibility of raising its growth forecast from the current estimate of 0.5% for the fiscal year ending next March. This optimism stems from the fact that global demand related to artificial intelligence (AI) is contributing to the resilience of the Japanese economy.
BOJ officials will also consider changing their assessment that economic risks remain "skewed to the downside." This change reflects growing confidence that the Japanese economy can avoid a deeper slowdown.
This improved outlook represents a significant change from April, when the BOJ warned that Middle East conflict could put significant pressure on the economy. These concerns have eased as major supply chain disruptions have not yet occurred, particularly as companies seek alternative sources of raw materials.
Another factor supporting the Japanese economy is rising export prices, primarily due to strong global demand for AI-related products. This helps offset pressure from rising energy import costs, while also supporting corporate profits and household incomes.
However, from an inflation perspective, the BOJ still sees the risk of continued price increases. Companies are believed to be passing on cost increases to consumers more quickly than before. This will impact the market; the yen and Japanese stocks will be sensitive to BOJ signals, especially if the economic projections are raised but interest rates remain on hold. (arl)
Source: Newsmaker.id
