The Bank of Japan is said to be pencilling in higher inflation forecasts for this year and next. Citing unnamed sources, Bloomberg reported the BoIs forecast is likely to be close to 3% For this year rather than the 2.5% in the current forecast, and then 2% for the year 2024/25 (beginning next April), up from 1.9%. The forecast for 2024/25 is crucial: if that's the case, it would mean three consecutive years of inflation above 2%. Next year's adjustment is only a tweak so it's unlikely to change the Bol's mindset that its still too early to claim victory and change policy. But it does indicate progress is being made and the BoJ is keen to communicate that. Also note that Rengo, Japan's largest trade union, has told its member companies to demand wage gains of at least 5% next year. That would be similar to last year and, in the case of Japan, a positive sign. - UBS Strategy
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