The Bank of Japan saw core inflation hovering around 3 percent, well above its 2 percent target, for two years in a row under a risk scenario released on Thursday that assumed elevated oil prices and a weakening yen.
Under the board's baseline scenario released on Tuesday, the BOJ said it expects the core consumer price index (CPI) to rise 2.8 percent in the current fiscal year ending in March 2027 and by 2.3 percent the following year.
In a rare move, the central bank released on Thursday a risk scenario based on the assumption that crude oil prices remain at around US$105 per barrel through the year-end, the yen weakens 10 percent from current levels and stock prices fall by 20 percent.
Under the risk scenario, core inflation will hit 3.1 percent in fiscal 2026 and 3.0 percent in 2027 before slowing to 2.3 percent in 2028, the BOJ said in a full version of its quarterly outlook report.
"It is especially notable that a rise of about 3 percent is expected for two years in a row in fiscal 2026 and 2027," the report said.
"This upward deviation in the CPI could become a factor that pushes up medium- to long-term inflation expectations," it said.
Reuters
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