Bank of Japan Lowers Inflaiton Target as Growth Accelerates

Hiruki Nakamura
21 Jan, 2015
New York City

Bank of Japan reaffirmed its commitment to increase monetary base by annual 80 billion yen but lowered its inflation target on the recent plunge in oil price. Governor Haruhiko Kuroda said growth is expected to accelerate in the next fiscal year to 2.1%.

[R]4:30 PM Tokyo – Bank of Japan reaffirmed its commitment to increase monetary base by annual 80 billion yen but lowered its inflation target on the recent plunge in oil price. Governor Haruhiko Kuroda said growth is expected to accelerate in the next fiscal year to 2.1%.[/R]

After sharp rebound for three days, the Nikkei average slipped as the yen rebounded after the Bank of Japan left its monetary policy unchanged.

The Bank of Japan after a two-day policy meeting reaffirmed its commitment to increase monetary base by 80 billion yen or $674 billion and lowered its core inflation estimate to 1% from the previous estimate of 1.7% in the fiscal year starting from April.

The central bank also said the drop in oil price my delay reaching its inflation target to 2% but the latest decline in oil prices are expected to benefit the economy in the long term.

The Bank of Japan revised higher its growth estimate to 2.1% for the next fiscal year and held out for the oil to rebound towards the end of fiscal year ending in March to $70 a barrel price for Dubai crude.

The central bank also said core rate of inflation is expected to increase to 2.2% in the fiscal year 2017 but the economy is expected to slow down to 1.6%.

The Nikkei 225 Stock Average slipped 85.82 or 0.5% to 17,280.48 and the broader Topix index fell 7.02 to 1,390.61.

The yen strengthened to close at 117.50 against one dollar.

Stocks in Review

Fujikura Ltd declined 4.5% to 472 yen after the Nikkei newspaper said operating profit in the nine-month period ending in December for the machinery and metal product supplier to decline 40% but still above 10 billion yen.

Milbon Co., Ltd slipped 1.5% to 3,045 yen after the hair-care product maker reported net sales in the year ending in December climbed 5.9% to 25.23 billion yen from 23.83 billion yen a year ago period.

Net income in the year jumped 4.2% to 2.62 billion yen compared to 2.52 billion yen and earnings per share increased to 160.07 yen from 152.85 yen in the same period a year ago.

TDK Corp dropped 2% to 7,330 yen after the Nikkei newspaper reported net sales of the recording device maker for the nine-month period ending in December to climb 7% to 800 billion yen mainly due to strong sales of components for smart-phone and automotive industry.

The company estimated operating profit for the period of about 50 billion yen from a year ago period.