Bank of Japan likely to raise inflation forecast to over 2.5% - Kyodo

TOKYO (Reuters) - The Bank of Japan (BOJ) will raise its inflation forecast for this fiscal year to above 2.5% at its next policy meeting as a weakening yen and higher raw material costs drive up prices, the Kyodo news agency cited sources as saying on Monday.

While the upgrade will bring inflation more firmly above the central bank's 2% target, the BOJ policy board was likely to keep ultra-loose monetary policy in place to support Japan's economy, Kyodo said.

In quarterly projections due to be released at the conclusion of the Oct. 27-28 policy-setting meeting, the BOJ would likely increase its core consumer inflation forecast for the fiscal year through March 2023 to above 2.5% from the current estimate of a 2.3% rise, Kyodo reported.

While consumer inflation has exceeded the BOJ's 2% target, central bank Governor Haruhiko Kuroda has characterised recent inflation as being cost-push, emphasising it must be accompanied by stronger wage growth to consider altering the ultra-easy policy.

Consumer inflation is expected to fall short of the central bank's target in the next fiscal year, Kuroda told parliament on Monday.

(Reporting by Mariko Katsumura and Daniel Leussink; Editing by Chang-Ran Kim, Robert Birsel)