Bank of Japan lowered its forecast for annual inflation

Bank of Japan lowered its forecast for annual inflation, but left its quantitative easing program unchanged. Also the deposit rate remains at negative level of -0.1%. The central bankers reduced the forecasts for the economy and set the deadline for achieving the 2.0% target level of inflation at the end of March 2019. The previous deadline was sent an year earlier at the end of March 2018, but the economists were discouraged by the negative economics data during the last months.

The decision to keep the incentives program unchanged comes despite the fact that the official measure of inflation showed that consumer prices declined in every month since March. The Bank of Japan index, which excludes fresh food and energy, rose by just 0.2% in September, which was the weakest pace in three years.

In April 2013, the Governor of Bank of Japan, Haruhiko Kuroda, boldly promised that the country will achieve 2% inflation within two years, which however did not happen. His actions now suggest that he has taken a slow and pragmatic approach, which largely reflects the inability of central banks around the world to promote growth in consumer prices.

At its previous meeting in September, Bank of Japan modified its monetary policy by focusing more on interest and on control of the yield curve on 10-year bonds and now the goal is the return to behave around zero.

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