The Bank of Japan is likely to cut its inflation forecasts for the coming two fiscal years at a quarterly review next month, sources familiar with its thinking say, keeping it under pressure to do more to hit its ambitious 2% price target. 
The downgrades, due largely to falling import prices from the yen’s rise and sluggish wage growth, would underscore the dilemma the BoJ faces as it struggles to reflate the flagging economy with a dwindling tool-kit. 
While BoJ governor Haruhiko Kuroda has stressed that he sees no limits to its already massive money-printing programme, many central bank policymakers are hesitant of easing now after having just adopted negative interest rates in January. 
“Currency moves and wage negotiations have a big effect on prices,” said one of the sources, acknowledging that significant cuts to the BoJ’s current price forecasts may be inevitable. 
The BoJ’s nine-member board produces a median estimate on economic and price growth every quarter. In January, the BoJ projected core consumer inflation would hit 0.8% in the fiscal year 2016 beginning in April, and 1.8% in the following fiscal year. 
An internal estimate by the BoJ showed the yen’s rise alone will shave around 0.2-0.3 percentage point off inflation, while disappointingly slow wage growth will also weigh on prices. 
At the next review on April 27-28, the central bank is thus likely to cut its inflation forecast to around 0.5% for fiscal 2016 and to around 1.5% for fiscal 2017, the sources said. 
As a result, the BoJ may push back once again the timeframe for hitting its 2% inflation target. At present, it expects inflation to reach 2% by around September 2017.  Japan’s consumer inflation rate was zero in the year to February.  The gloomy price outlook will heighten pressure on the central bank to expand monetary stimulus to support the economy and show its determination in achieving its ambitious inflation target.  But analysts are divided on whether the BoJ will ease again in April with the central bank still scrambling to deal with the confusion it caused among the public and markets with its January decision to adopt negative interest rates.