The Bank of Japan (BOJ) has issued a warning that persistently high oil prices and a weaker yen could keep core inflation around 3% for two consecutive years. This projection, part of a risk scenario released on Thursday, suggests inflation significantly above the BOJ's 2% target. The scenario assumes crude oil prices will remain at approximately $105 per barrel by year-end, the yen will depreciate by 10%, and equity markets will fall by 20%.
In its baseline scenario, the BOJ projected core CPI to rise by 2.8% for the fiscal year ending March 2027 and 2.3% the following year. However, under the risk scenario, core inflation is expected to reach 3.1% in fiscal year 2026 and 3.0% in 2027, before declining to 2.3% in 2028. The BOJ noted that this sustained inflation could influence medium- to long-term inflation expectations.
BOJ Warns High Oil Prices, Weak Yen May Sustain 3% Inflation
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