"If the BOJ is delaying its target without easing policy again, I think there will be some disappointment in the market"
- Daiju Aoki, an economist at UBS Securities
The Bank of Japan downgraded its next financial year's inflation outlook amid precipitous drops in oil prices, which continue to see the central bank's 2% goal slip further from achieving. Nevertheless, the BoJ decided to hold off from making any adjustments to its quantitative easing scheme, but expanded a loan programme aimed at spurring lending. Thus, the central bank kept its pledge to expand money base at annual pace of 80 trillion yen via purchasing government bonds and risk assets, the unchanged amount set in October when the bank adjusted its QQE programme due to easing inflation pressures and expectations. The ongoing plunge of oil prices, which have almost halved since October, has kept alive anticipation the BoJ will increase its monetary accommodation in the foreseeable future. Many policymakers are concerned of expanding QQE further with the bank's huge purchases already pushing five-year government bond yields into red territory. The BoJ now predicts consumer inflation of around 0.9% in the 2014 fiscal year compared with 1.2% estimated in October. The central bank's inflation outlook for the 2015 fiscal year was lowered to 1.0% from 1.7% previously. The BoJ is striving to reach medium-term inflation of 2%, after suffering from almost 15 years of deflation before the introduction of QQE. The BOJ revised upward next fiscal year's economic growth forecast to 2.1% from 1.5%, suggesting that an increase in growth will boost wages and accelerate inflation.
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