The BoJ still projects inflation to ease again with the FY2025 CPI forecast at 1.7%.This is below the BoJ’s 2% inflation target, signalling the BoJ still views the currentsurge in inflation will prove temporary.However the BoJ have also noted that they expect “underling CPI inflation will increase gradually toward achieving the price stabilitytarget of 2%”.
The BoJ also notes moves in FX and commodity markets will affect imported and domestic prices which could pose risks to its inflation forecasts.Indeed, Japanese officials have repeatedly warned against the rapid weakness in the JPY.
We maintain our forecast that the BoJ will leave interest rates on hold until Q2 2024 at the earliest. - CBA
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