Commodities rising won’t help BoJ achieve inflation target
The Bank of Japan (BoJ) left monetary policy unchanged at today’s (28th October) meeting, retaining current short- and long-term interest rate levels. There were no surprises in the BoJ’s quarterly Outlook Report, either. Growth forecast for FY2021 has been revised down modestly due to weak consumption in summer and the effect of a chip shortage. As expected, inflation forecasts for FY2021 have been revised down by 0.6ppts due to the rebasing of the CPI in August which has amplified the impact of the March 2021 cut in mobile-phone rates.
What you will learn:
- Global commodity price increases have driven the PPI inflation rate to a historic high, while energy components have pushed up headline CPI inflation by 0.5 ppt in September. However, the median CPI forecast in BoJ’s Outlook Report continues to fall short of the 2% target, with 0.9% for the 2022 fiscal year, and 1.0% for FY2023.
- We believe the impact of commodity price increases on the CPI will be limited and transitory. Second-round effects will continue to be restrained against the background of weak demand and pricing power, similar to the 2008 episode.
- We expect the BoJ to maintain current rates for the foreseeable future, with a cut to the short-term (negative) policy rate doubtful. New Prime Minister Kishida is unlikely to alter the BoJ’s current monetary-policy stance.
Tags:
Related Services

Post
Latin America Key Themes 2024 – Slower growth, but it’s not all bad news
Growth in most LatAm economies will be below consensus. Economic momentum has surprised to the upside through most of 2023, but the full effects of record global and domestic monetary tightening are yet to be seen.
Find Out More
Post
Easing financial conditions offer CRE some respite
Our measure of financial conditions has become less restrictive in the US and started to loosen in the eurozone and the UK, reflecting investors' expectations that interest rates have peaked. This should aid the outlook for commercial real estate (CRE) on the margins, although the scale of past rate hikes, sluggish economies, and structural headwinds mean the sector still confronts challenging fundamentals.
Find Out More