BOJ May Fail to Achieve Inflation Target in 2013, Moody’s Says

The Bank of Japan (8301) is increasing its purchases of government debt because it probably won’t meet its inflation goal in 2013, Moody’s Investors Service said.

“It looks like the BOJ’s 1 percent inflation target won’t be hit,” Tom Byrne, Moody’s senior vice president in charge of Asia sovereign credit ratings, said to reporters in Manila today. “Hence the BOJ is increasing its asset-purchase program.”

The central bank last week increased the size of its asset- purchase program to 40 trillion yen ($498 billion) and gave an inflation outlook of 0.7 percent for the year starting in April 2013. The BOJ said April 27 it would reach the “price stability goal in the medium to long term of 1 percent” soon after the end of the financial year through March 2014.

Governor Masaaki Shirakawa has been under pressure to expand easing to defeat deflation. A group of lawmakers this year proposed overhauling the BOJ’s governing law to ensure steps to end the price declines afflicting the nation for more than a decade.

Japan’s consumer prices excluding fresh food rose 0.2 percent in March from a year earlier. Inflation is “unlikely to reach 1 percent any time soon, thus the BOJ’s easy money stance is likely to remain unchanged,” Takuji Aida, senior Japan economist at UBS AG in Tokyo, said in a research note yesterday.

To contact the reporter on this story: Andy Sharp in Manila at asharp5@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net

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