TOKYO—Japan thought it was on track to beat deflation. Then came the Amazon effect.

The country’s retailers have been cutting prices in response to the rise of online rivals like Amazon.com Inc., disrupting what had seemed like perfect conditions for Japan to get the stable dose of inflation it has long been looking for.

In part as a result, Japan’s central bank is likely to lower its price forecast for the current financial year at its policy meeting on Thursday, said people familiar with its thinking. That reflects continued resistance to price rises, despite Japan’s longest economic expansion in 11 years and its tightest labor market in decades. The Bank of Japan is also likely to raise its view on the economy while keeping its policy settings on hold, the people said.

Japan isn’t alone in its surprise at the slow response of prices to improved economic strength. Policy makers, economists and central bankers in the U.S. and Europe are also scratching their heads about why prices around the world can move so little while economic growth gathers momentum—a factor that usually drives inflation.

While BOJ officials continue to refer to a number of factors that are holding back price gains, e-commerce is now among them, people familiar with their thinking said.