BOJ cuts inflation forecast, warns of soft consumption as pandemic pain lingers

FILE PHOTO: A man wearing a protective mask stands in front of the headquarters of Bank of Japan amid the coronavirus disease (COVID-19) outbreak in Tokyo, Japan, May 22, 2020.REUTERS/Kim Kyung-Hoon/File Photo

TOKYO (Reuters) - The Bank of Japan on Tuesday cut this fiscal year’s consumer inflation forecast and warned of lingering risks to the economic outlook as the COVID-19 pandemic continues to hurt consumption.

As widely expected, the BOJ maintained its short-term interest rate target at -0.1% and that for 10-year government bond yields around 0%.

“The pick-up in consumption is stalling as downward pressure on service spending, such as for dining and accommodation, is strengthening,” the central bank said in a quarterly report on the economic and price outlook.

In its fresh quarterly projections, the BOJ said it expects core consumer inflation to hit 0.1% in the current fiscal year that began in April. That was lower than 0.5% projected in January.

The BOJ now expects core consumer inflation to hit 0.8% the following year and 1.0% in fiscal 2023.

(Reporting by Leika Kihara, Tetsushi Kajimoto and Daniel Leussink; Editing by Chang-Ran Kim)