BOJ expects core consumer inflation to hit 1% in current fiscal year ending March 2020, falling short of its 2% targetYears of heavy money printing have failed to prop up prices and change public perceptions that inflation will be subdued, dashing the hopes of BOJ policymakers that aggressive monetary easing will lift Japan sustainably out of deflation.
But the BOJ estimates appear optimistic compared with private sector economists. Capital Economics now expects underlying inflation to fall towards zero next year. Underscoring fragile domestic demand, an index stripping away the effects of fresh food and energy costs, which is seen by the BOJ as a key indicator of inflation, was up 0.5 per cent in the year to September, slowing from the previous month's 0.6 per cent gain.
Governor Haruhiko Kuroda had said the move was among options that the central bank would consider if it was to ease policy, despite concerns that such a move could further hurt profits at financial institutions grappling with already thin margins.