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Dow Jones Newswires: BOJ raises inflation expectations, maintains ultralow interest rates

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TOKYO — The Bank of Japan on Friday raised its inflation forecast by 0.6 percentage point amid increases in energy prices and a weak yen, but it left its ultralow interest rates unchanged and said it expects inflation to fall below its 2% target next fiscal year.

The BOJ’s policy board expects core consumer prices excluding volatile fresh food prices to increase 2.9% in the current year ending March 2023, compared with the previous forecast for a 2.3% rise, the bank’s quarterly outlook showed Friday.

The policy board expects core inflation to slow to 1.6% in the year ending March 2024 and stay at 1.6% the following year.

The BOJ on Friday maintained short-term interest rates at minus 0.1% and its target for the 10-year Japanese government-bond yield at around zero. Next week, the Federal Reserve is widely expected to carry out another 0.75-percentage-point rate increase to fight the fastest pace of inflation in four decades.

The BOJ’s decision reinforces expectations that the interest-rate difference between the U.S. and Japan will continue widening. That difference has been a major cause for the yen’s rapid fall this year.

The central bank projected that the Japanese economy will expand 2.0% in the current fiscal year, down from 2.4% growth projected in its previous report. It forecast 1.9% growth in the year ending March 2024 and 1.5% growth the following year.

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