BoJ Governor Masaaki Shirakawa stated that domestic developments will be modest as households face a weakening labor market while businesses continue to scale back on production in an effort to weather the downturn in global trade. Development on an international level is also expected to be modest as supply currently exceeds demand while global price pressures remain subdued. As a result, the central bank head said that it will take a ‘considerable’ amount of time before price growth comes back to a ‘desirable level,’ and the BoJ is likely to maintain a dovish policy stance going forward in an effort to stem the downside risks for growth and inflation. Core prices are forecasted to remain or incur a slight downturn in the near future, and the annual rate of inflation may continue to hold below the 2% target as Governor Shirakawa continues to see underlying weakness in the domestic economy. As a result, investors anticipate the central bank to hold the benchmark interest at 0.10% going into the following year, and the newly-elected government may take additional steps to jump-start the ailing economy as the outlook for growth and inflation remains weak.
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