FXStreet (Mumbai) - The Bank of Japan (BOJ), in its semi-annual report, pushed back its inflation target to second half of FY 2016 and said the timing of hitting the CPI target is dependent on oil prices.

The bank also revised its growth and inflation forecasts lower as expected and once again reiterated readiness to do more or adjust policy as needed to achieve its inflation target.

Key Points

BOJ expects to hit 2% CPI target by around second half of FY 2016, pushing back timeline from previous estimates

FY2015 GDP now seen at 1.2% vs 1.7% prior, FY2016 1.4% vs 1.5% prior, FY2017 0.3% vs 0.2% prior

Downgrades FY2016 core CPI estimate to 1.4% from 1.9% prior

Growth and inflation risks skewed to the downside, but the price growth trend steadily improving. Potential growth rate around 0.5% or lower

CPI outlook downgrade due to oil price drop. Inflation to accelerate as impact of oil fades, but considerable uncertainty in outlook

Wage improvement somewhat slow but mechanism seen for inflation rise with wage growth. Risks include 2017 sales tax rise

Easing exerting intended effects, will continue until 2% inflation is stable. Will monitor risks, adjust policy as needed