Core inflation will accelerate to 2.2 percent in the year starting in April 2016, with gross domestic product expanding 1.6 percent, according to the BOJ’s forecasts, which are based on median projections of the nine-member policy board and strip out the effects of sales-tax increases.
The central bank based its outlook on an assumption that Dubai crude oil prices will rise to about $70 per barrel toward the end of the projection period that runs through March 2017. Dubai crude closed at $44.19 a barrel yesterday.
The BOJ’s economic outlook, which is more optimistic than forecasts from the International Monetary Fund, coincides with an expected weakening impact of a sales-tax increase last year and as falling oil prices reduce costs for some industries. Japan’s GDP is likely to grow by 0.6 percent this calendar year and by 0.8 percent in 2016, the IMF estimates.