However, the economy is expected to be under downward pressure due to rising commodity prices due to factors such as the situation around Ukraine, the report noted.
According to the Bank of Japan, despite the impact of factors such as rising commodity prices, Japan’s economy has recovered with an accelerated recovery of economic activity, and the population is protected from COVID-19. The economy is likely to recover and the impact of COVID-19 and supply-side constraints are easing, the bank said in its monetary policy statement.
Thereafter, as the virtuous cycle from income to expenditure gradually strengthens, Japan’s economy is projected to continue to grow at rates above potential growth rates.
The pace of change in the consumer price index (CPI for all goods except fresh produce) is likely to pick up year-on-year by the end of this year, driven by rising prices for items such as energy, food and durable goods.
After that, growth rates are expected to slow as the contribution of such price increases to the CPI is likely to decline, the report noted.
Meanwhile, core inflationary pressures are forecast to strengthen amid a narrowing output gap and rising medium- and long-term inflation expectations and wage growth.
The bank will support financing, mainly to firms, and maintain stability in financial markets, and will not hesitate to take additional mitigation measures if necessary, it said. He also expects short-term and long-term interest rates to remain at current levels or lower.
Fibre2Fashion News Desk (DS)
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