With that in mind, the median board member forecast for consumer prices (CPI) ex-fresh food in fiscal year 2024 did drop to 2.4%, from 2.8% last October.
The forecast then falls to 1.8% for fiscal 2025, while CPI ex-fresh food and energy is put at 1.9%. Neither would seem to be stably above 2%, begging the question of why exactly the BOJ should tighten policy as so many Western analysts expect.
A notable paragraph in the BOJ summary observed that years of deflation meant “the behaviour and mindset based on the assumption that wages and prices will not increase easily have taken hold in society”.
“Considering this, it is important to closely monitor whether a virtuous cycle between wages and prices will intensify.”
Governor Kazuo Ueda will have a chance to expand on his outlook in a press conference at 0630 GMT, and typically he tends to favour stability over change.
The next policy meeting isn’t until March 19, when this year’s round of annual wage talks will still be under way, so any move on rates will likely not come until the April 26 meeting, at the earliest.
That gives investors another three months to indulge in carry trades and stay short of the yen, while the Nikkei celebrated with another high before running into profit-taking.
Tokyo markets have also benefited from offshore funds fleeing China and signs that Washington’s restrictions on tech sales to Beijing are leading to more business investment in Japan – also known as friendshoring.
/cloudfront-us-east-2.images.arcpublishing.com/reuters/SBPJDYG5TBIRNNB77F64FPKUHE.jpg "BOJ struggles with a deflationary state of mind 40")
