The globally rising inflationary pressure has reached the Bank of Japan.

For the first time in seven years, Japanese monetary policymakers changed their basic assessment of price developments in the Asian country on Tuesday.

While this was previously largely determined by deflation risks, the bank's new economic outlook now states: "The risks for prices are generally balanced."

Patrick Welter

Correspondent for business and politics in Japan based in Tokyo.

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As a result, the central bank under Governor Haruhiko Kuroda no longer rules out the possibility that inflation could rise more sharply than forecast.

In recent years, the bank has repeatedly emphasized that the risks for prices are pointing downwards and has thus focused on the risk of deflation.

This fundamental redefinition did not lead the bank to change its specific monetary policy.

The central bank kept its negative interest rate and purchases of government bonds and other assets unchanged on Tuesday.

Signal for tighter monetary policy?

The Japanese yen briefly weakened against the dollar and euro following the decision.

Investors apparently see the Bank of Japan's decision as a signal that the Bank of Japan will start tightening monetary policy much later than the US Federal Reserve or the European Central Bank.

The Nikkei stock index eased slightly, down about 0.25 percent.

Like other countries, Japan is experiencing higher energy costs and price pressure due to tight supply chains around the world.

With an inflation rate of 0.6 percent recently, however, the price level has not risen nearly as much as in Europe or America.

Producer and wholesale prices, on the other hand, are rising sharply.

At least some of this price increase will feed through to consumer prices.

In the current forecast, the bank expects an inflation rate of around 1.1 percent for the fiscal year that begins in April.

That is 0.2 percentage points more than expected in October.

The central bank is now also forecasting an inflation rate of around 1.1 percent for the following year, 2023.

If that were the case, the bank would still be a long way from its medium-term inflation target of 2 percent.

The decision comes at a time when the omicron variant of the coronavirus is dramatically increasing new infections.

This harbors new economic risks, at least in the short term.

The government is considering putting the Tokyo and Osaka metropolitan areas back under tightened antivirus measures.

For economic growth in the coming fiscal year, the bank is estimating a rate of around 3.8 percent.

That's noticeably higher than previously expected, but largely reflects a shift in the economic recovery.

The shortage of primary products such as semiconductors due to tight supply chains has recently slowed down the Japanese economy.

The recovery in the current fiscal year of 2.8 percent is correspondingly weaker in the forecast.

According to the bank, however, this burden could lessen in the coming fiscal year and, together with the government's planned additional spending, could also boost growth.