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© Reuters. FILE PHOTO: A man stands in front of the headquarters of Bank of Japan in Tokyo, Japan, May 22, 2020. REUTERS/Kim Kyung-Hoon By Leika Kihara

TOKYO (Reuters) – The Bank of Japan is set to keep monetary policy settings steady on Thursday and project inflation to stay below its 2% target for at least two more years, reinforcing market bets it will lag other central banks in dialling back crisis-mode policies.

Rising commodity costs have pushed Japan’s wholesale inflation to a 13-year high in September. But the pass-through to households has been remarkably slow due to sluggish domestic demand, keeping consumer inflation stuck around zero.

In fresh quarterly estimates, the BOJ is set to slash its consumer inflation forecast for the year ending in March 2022 from the current 0.6%, sources have told Reuters.

Analysts expect no major change to the BOJ’s consumer inflation projection of 0.9% for fiscal 2022 and 1.0% for the following year, which would confirm price growth will stay well below the central bank’s elusive 2% target.

“With income barely rising, Japanese households have little choice but to go frugal when cost-push inflation hits,” said Hideo Kumano, chief economist at Dai-ichi Life Research Institute.

At the two-day rate review ending on Thursday, the BOJ is widely expected to maintain its target for short-term interest rates at -0.1% and that for 10-year bond yields around 0%.

Japan’s economy emerged from last year’s coronavirus pandemic-induced doldrums as robust overseas demand propped up exports, offsetting some of the weakness in consumption.

But supply bottlenecks and chip shortages have hit manufacturers, clouding the outlook for the export-reliant economy. Analysts say they need to wait for more data to see whether the Sept. 30 lifting of COVID-19 curbs will trigger a much-needed boost to consumption from pent-up demand.

While the BOJ is seen sticking to its projection of a moderate economic recovery, it may warn of risks such as slowing Chinese growth and the hit to output from supply constraints.

Major electric equipment maker Canon Inc slashed this year’s operating profit estimate by 11 billion yen to 272 billion yen on rising costs to procure parts and the hit to sales from Southeast Asian pandemic-led factory disruptions.

Markets are also focusing on whether BOJ Governor Haruhiko Kuroda will issue any warning against the yen’s recent weakness, which boosts exporters’ earnings but drives up already high import costs for retailers still reeling from the pandemic’s impact.

Kuroda is expected to brief media after the policy meeting.