TOKYO — The Bank of Japan said Thursday that inflation would likely rise above the bank’s 2% target this fiscal year, but it kept ultra-low interest rates unchanged to support the nation’s economic recovery from the pandemic.
The Japanese central bank maintained short-term interest rates at minus 0.1% and its target for the 10-year Japanese government bond yield at around zero.
The bank’s policy board expects core consumer prices excluding volatile fresh food prices to increase 2.3% in the current fiscal year ending March 2023, above the BOJ’s 2% target, according to the bank’s quarterly outlook released Thursday. It had previously projected a 1.9% rise.
The inflation projected by the BOJ is still much milder than the U.S., where inflation reached 9.1% in June, the fastest pace since November 1981. Federal Reserve officials have signaled they are likely to raise interest rates by 0.75 percentage points later this month.
The BOJ’s easy stance recently has fueled the yen’s fall against the U.S. dollar. After Thursday’s announcement, the yen stood at about 138.21 to the dollar. Last week, the yen fell to a fresh 24-year low at more than 139 to the dollar.
The bank expects core inflation to slow to 1.4% in the year ending March 2024 and 1.3% the following year.
Meanwhile, the BOJ projected that the Japanese economy would expand 2.4% in the current fiscal year, down from 2.9% growth projected in its previous report. It forecast 2.0% growth in the year ending March 2024 and 1.3% growth in the following year.