Bank of Japan Seen Predicting Miss of 1% Inflation Goal in 2014

The Bank of Japan (8301) this month will probably predict it will miss a 1 percent inflation goal in the next two fiscal years, according to people familiar with the matter.

BOJ board members will at month-end release updated economic projections for the 2012 and 2013 fiscal years and the first set of forecasts for the year beginning in April 2014. The figures will probably show consumer prices, excluding fresh food, rising less than 1 percent, the people said on condition of anonymity because the discussions are private.

Price declines have steepened since May, showing the BOJ’s struggle to attain its inflation target and adding pressure on the bank to reverse deflation and aid growth. JPMorgan and UBS AG are among those predicting the BOJ will boost asset purchases for the second time in two months at the Oct. 30 board meeting.

“Achieving the 1 percent goal looks difficult,” said Hideo Kumano, chief economist at Dai-Ichi Life Research Institute in Tokyo and a former central bank official. “I expect the BOJ will put out a figure of 0.5 or 0.4 percent for fiscal 2014, and the market will expect more easing until the bank achieves its goal.”

Prices fell 0.3 percent in August from a year earlier, down for the fourth straight month and matching the steepest decline in 16 months. Citigroup Inc. and JPMorgan Chase & Co. expect the Japanese economy to contract in the third and fourth quarters of this calendar year.

The BOJ said in July that it expected prices to grow 0.7 percent in fiscal 2013 after a 0.2 percent gain this fiscal year. At its last meeting that ended on Oct. 5, the central bank held off from more easing after adding to stimulus in September.

To contact the reporters on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net; Masahiro Hidaka in Tokyo at mhidaka@bloomberg.net

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

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