TOKYO, Jan. 18, 2022—The Bank of Japan, the central bank, Jan. 18 raised its consumer price index outlook to plus 1.1 percent in fiscal 2022 starting April 1, from the previous level of plus 0.9 percent the bank set in October. The bank also revised upward real GDP growth outlook to 3.8 percent from 2.9 percent in fiscal 2022 while revising down the fiscal 2021 outlook to 2.8 percent from 3.4 percent.
Since as early as 2021 spring, consumer prices have been crawling higher with hardly any respite as energy prices rose stubbornly upward in response to the easing of COVID restrictions globally. CPI registered steeper growth over the October-December quarter to January as oil and other energy prices climbed further. Grocery prices are soaring reflecting the rise of imported food produce prices. The corporate goods price index the bank reported earlier for December rose 8.5 percent year-on-year after jumping 9.2 percent in November.
The reason why the bank released such a low CPI outlook is simply for facilitating smooth distribution of Japanese government debt. If the bank said CPI would rise, say, 3 percent next year, the Japanese government would have enormous difficulty refinancing Japanese government bonds at present yield levels of 0.13-14 percent. The last JGB sale on Dec. 6-27 for retail investors disappointed the market, Reuters had reported.
‘Mr. (Haruhiko) Kuroda (who previously was the Ministry of Finance vice minister for international finance) is paying respect to the MoF Treasury Bureau (which issues JGBs),’ a retired executive of a Japanese securities company told The Prospect. ‘MoF is more important than tightening money for him.’
Today’s BOJ decision, he said, is ‘a national embarrassment.’ Other countries, especially Korea, which earlier raised its benchmark lending rate, would view BOJ as incompetent that could end up stoking inflation and make it out of control, he said. Backing up his view, Kuroda told a news conference this afternoon saying the BOJ policy board did not discuss raising interest rates.
It must be a joke!
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