The Bank of Japan is putting more emphasis on an inflation gauge that excludes fuel costs, and will likely raise its projections for the index's growth in quarterly forecasts due this month, said three sources familiar with its thinking.
The upgrade would underscore the central bank's growing conviction that robust domestic demand will allow firms to raise prices, and keep inflation sustainably around its 2% target in coming years.
"When stripping away one-off factors like government subsidies, trend inflation appears to be gaining momentum," another source said, expressing a view that was echoed by the third. With government fuel subsidies and scheduled utility bill hikes muddling this year's price outlook, the BOJ was now focusing more on the core-core index in determining whether Japan could achieve sustained price rises, the sources said.
In current forecasts, made in October, the board projected the average level of the core-core consumer price index this fiscal year will be 1.8% higher than in fiscal 2021. It expects fiscal 2023 and fiscal 2024 each to show rises in the index of 1.6%.Surging raw material import costs have pushed inflation well above the BOJ's 2% target in recent months, achieving what Kuroda's decade-long stimulus efforts had failed to accomplish.
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