Optimistic economic forecasts of Bank of Japan
2023.01.12 02:51
Optimistic economic forecasts of Bank of Japan
By Kristina Sobol
Budrigannews.com – The Bank of Japan emphasized its conviction that Japan is on track to achieve its 2% inflation target on Thursday by providing a more upbeat assessment of the state of the nation’s economy and pointing to the growing number of businesses planning wage increases.
The central bank stated in a report analyzing regional economies that a rebound in overseas visitors, fueled by Japan’s reopening of borders and the weak yen, also increased service consumption, which is a welcome development for Japan’s fragile economic recovery.
The BOJ increased its economic assessment for four of the nine regions of the nation in the quarterly report. It kept the same rating for the remaining five.
It stated, “Many regions saw their economies pick up, or moderately pick up.”
According to the report, rising costs for raw materials and fuel appeared to be making it difficult for some businesses to raise wages.
According to the report, “but there were many cases where companies were increasing winter bonus payments or plan to hike wages” in order to deal with the tight labor market and compensate employees for the rising cost of living.
At a policy meeting on January 17-18, the BOJ’s board will examine the report as one of the factors in preparing new quarterly growth and inflation forecasts.
Reuters has been informed by sources that the BOJ will most likely increase its inflation forecasts next week. This is an indication of the BOJ’s growing belief that conditions could gradually develop to reduce its massive stimulus.
As businesses continued to pass on rising raw material costs to households, Japan’s core consumer prices increased by 3.7% in November from a year earlier, marking a 40-year high and exceeding the BOJ’s 2% target for eight consecutive months.
According to BOJ Governor Haruhiko Kuroda, in order for the central bank to be able to gradually end its stimulus, wage growth must coincide with price increases.
A supermarket in Yokohama, a city south of Tokyo, was quoted in the report as saying, “We raised the base salary last autumn and may further raise wages this year in light of recent price rises and improvements in our earnings.”
According to Hirohide Koguchi, the manager of the BOJ’s Osaka branch, a steady stream of tourists from Europe, the United States, and Southeast Asia is increasing service consumption in the Kansai region of western Japan.
“Duty-free sales have increased by 70% from their pre-pandemic levels. “He told a news conference that if this trend continues, it will support not only the Kansai region but the entire Japanese economy.”
In the third quarter of the previous year, Japan’s economy contracted by an annualized 0.8% as rising raw material costs weighed on domestic consumption and slowing global growth hurt exports.
Although the rising cost of living and China’s slowdown cloud the outlook, analysts anticipate that Japan’s recovery will be supported by a delayed rebound in consumption following the COVID-19 pandemic.
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