Bank of Japan Monetary Policy Decision

Monetary Policy Decision Monetary Policy

Source: Bank of Japan
Source Link: https://www.boj.or.jp/
Next Release(s): March 18th, 2026 10:00 PM

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The Bank of Japan decided by a vote of 8-1 that it will continue to keep its overnight call rate at around 0.75%.
- The one dissenter preferred to increase the call rate to around 1.00%.
Summary of the January 2026 edition of the Outlook for Economic Activity and Prices:
- Japan's economy is likely to continue growing moderately, with overseas economies returning to a growth path, and as a virtuous cycle from income to spending gradually intensifies, supported by factors such as the government's economic measures and accommodative financial conditions, while the economy is projected to be affected by trade and other policies in each jurisdiction.
- The year-on-year rate of increase in the consumer price index (CPI, all items less fresh food) is likely to decelerate to a level below 2 percent in the first half of this year, with the waning of the effects of the rise in food prices, such as rice prices, and partly due to the effects of government measures to address rising prices. However, it is likely that the mechanism in which wages and prices rise moderately in interaction with each other will be maintained, and that underlying CPI inflation will continue rising moderately. Thereafter, since it is projected that a sense of labor shortage will grow as the economy continues to improve and that medium- to long-term inflation expectations will rise, it is expected that underlying CPI inflation and the rate of increase in the CPI (all items less fresh food) will increase gradually and, in the second half of the projection period, be at a level that is generally consistent with the price stability target.
- Comparing the projections with those presented in the previous Outlook for Economic Activity and Prices (Outlook Report), the projected real GDP growth rates for fiscal 2025 and 2026 are somewhat higher, mainly due to the effects of the government's economic measures; on the other hand, the projected growth rate for fiscal 2027 is somewhat lower. The projected year-on-year rates of increase in the CPI (all items less fresh food) are more or less unchanged.
- Risks to the outlook include developments in overseas economic activity and prices under the impact of trade and other policies in each jurisdiction, wage- and price-setting behavior of firms, and developments in financial and foreign exchange markets, and it is necessary to pay due attention to the impact of these risks on Japan's economic activity and prices.
- With regard to the risk balance, risks to both economic activity and prices are generally balanced.
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The Bank of Japan raised its policy rate by 25 bps to around 0.75% following the December 2025 meeting, adjusting monetary accommodation as wage and price dynamics strengthened. This is the first hike since January of this year, bringing interest rates to the highest in 30 years.
- The Policy Board unanimously set the uncollateralized overnight call rate at around 0.75%, marking a step up from the prior guideline and signaling continued normalization of policy settings.
- The interest rate on the complementary deposit facility was raised to 0.75%, while the basic loan rate was set at 1.0%, aligning the Bank’s administered rates with the new policy stance.
- The BoJ assessed that Japan’s economy has recovered moderately, with tight labor market conditions and high corporate profits supporting continued wage increases despite some tariff-related weakness in manufacturing.
- Underlying CPI inflation has continued to rise moderately, with firms increasingly passing higher wages through to selling prices, reinforcing the view that wage–price dynamics are becoming more entrenched.
- Headline CPI inflation (excluding fresh food) has been around 3% recently, driven largely by food price increases, but is expected to decelerate below 2% in the first half of fiscal 2026 as these effects wane.
- The Bank judged that the likelihood of underlying inflation reaching a level broadly consistent with the 2% price stability target in the second half of the projection period has increased.
- Real interest rates are expected to remain significantly negative even after the rate hike, indicating that overall financial conditions will stay accommodative while the BoJ continues to adjust policy gradually if the outlook is realized.
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The Bank of Japan decided by a vote of 7-2 that it will continue to keep its overnight call rate at around 0.5%.
- The two dissenters preferred to increase the call rate to around 0.75%.
Summary of the October 2025 edition of the Outlook for Economic Activity and Prices:
- Japan's economic growth is likely to be modest, as trade and other policies in each jurisdiction lead to a slowdown in overseas economies and to a decline in domestic corporate profits and other factors, although factors such as accommodative financial conditions are expected to provide support. Thereafter, Japan's economic growth rate is likely to rise, with overseas economies returning to a moderate growth path.
- The year-on-year rate of increase in the consumer price index (CPI, all items less fresh food) is likely to decelerate to a level below 2 percent through the first half of fiscal 2026, with the waning of the effects of the rise in food prices, such as rice prices. Meanwhile, underlying CPI inflation is likely to be sluggish, mainly affected by the growth pace of the economy. Thereafter, since it is projected that a sense of labor shortage will grow as the economic growth rate rises and that medium- to long-term inflation expectations will rise, it is expected that underlying CPI inflation and the rate of increase in the CPI (all items less fresh food) will increase gradually and, in the second half of the projection period, be at a level that is generally consistent with the price stability target.
- Comparing the projections with those presented in the previous Outlook for Economic Activity and Prices (Outlook Report), the projected real GDP growth rates and the projected year-on-year rates of increase in the CPI (all items less fresh food) are more or less unchanged.
- There are various risks to the outlook. In particular, it still remains highly uncertain how overseas economic activity and prices will react to trade and other policies in each jurisdiction. It is therefore necessary to pay due attention to the impact of these developments on financial and foreign exchange markets and on Japan's economic activity and prices.
- With regard to the risk balance, risks to economic activity are skewed to the downside for fiscal 2026. Risks to prices are generally balanced.
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The Bank of Japan kept its policy rate at “around 0.5%” in September 2025 and confirmed plans to sell ETFs and J-REITs in line with its disposal principles, aiming to avoid market disruption.
- The decision passed by a 7–2 majority for the rate stance, while the vote on ETF and J-REIT sales was unanimous.
- Japan’s economy is recovering moderately, supported by resilient private consumption and solid corporate profits, though tariffs have weighed on manufacturing and exports.
- Business fixed investment continues to trend upward, while housing investment remains weak and public investment is largely flat.
- CPI (ex fresh food) is running between 2.5–3.0% YoY, driven by rising food costs and wage pass-through, while inflation expectations are edging higher.
- The BoJ expects growth to slow in the near term due to global trade policies and weaker overseas economies but to gradually improve later as external demand recovers.
- Underlying inflation is likely to soften in the near term before gradually rising, supported by labor shortages and higher inflation expectations, with CPI expected to align with the 2% target in the latter half of the projection period.
- Risks remain elevated, particularly around global trade and policy developments, which could significantly impact growth, prices, and financial markets.
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The Bank of Japan kept rates unchanged at 0.5% in its July 2025 meeting, in line with expectations. The “Statement on Monetary Policy” was short, noting that the BoJ policymakers decided unanimously to “encourage the uncollateralized overnight call rate to remain at around 0.5%.”

The Bank of Japan (BoJ) maintained its cautious outlook in July 2025, projecting slower near-term growth and easing inflation but affirming that underlying price pressures should rise gradually as labor shortages intensify.
- Real GDP is projected to grow +0.6% in FY2025, +0.7% in FY2026, and +1.0% in FY2027, broadly unchanged from April forecasts.
- CPI (excluding fresh food) is forecast at +2.7% YoY in FY2025 (revised up from +2.2%), then moderating to +1.8% in FY2026 and holding around +2.0% in FY2027.
- Core CPI (ex. fresh food and energy) is expected at +2.8% in FY2025, slowing to +1.9% in FY2026 before returning to +2.0% in FY2027.
- Current CPI inflation is running at 3.0–3.5% YoY, driven by rising food prices (especially rice) and wage pass-through.
- The BoJ sees downside risks to growth in FY2025–26 due to global trade policy uncertainty but views inflation risks as balanced. Policy rate hikes remain likely if the baseline outlook is achieved.
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The Bank of Japan maintained its policy rate at “around 0.5%” and announced an adjustment in its plan to gradually reduce its Japanese government bond (JGB) purchases, aiming to bring monthly purchases down to ¥2 trillion by Q1 2027.
- The tapering plan will cut purchases by ¥400B per quarter through Q1 2026 (part of the existing plan decided in July 2024), then by ¥200B per quarter through Q1 2027.
- Core CPI (ex fresh food) is running at around 3.5% YoY, with inflation driven by wage pass-through and rising food and import prices.
- The BoJ expects underlying inflation to slow near term but rise gradually later as labor shortages and inflation expectations build.
- Japan’s economy is recovering moderately, though consumer sentiment remains soft and housing investment is weak.
- The BoJ warned that risks remain high due to global trade policy shifts and their impact on markets and domestic activity.
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The Bank of Japan kept rates unchanged at 0.5% in its May 2025 meeting, in line with expectations. The “Statement on Monetary Policy” was short, noting that the BoJ policymakers decided unanimously to “encourage the uncollateralized overnight call rate to remain at around 0.5%.”

The BoJ also updated its outlook for growth and inflation:
- The outlook for growth in 2025 was downgraded from a median estimate of 1.1% in the previous outlook to 0.5%.
- The outlook for inflation in 2025 was also downgraded with the median CPI (less fresh food) rate estimated at 2.2%, down from 2.4% previously. On the other hand, the BoJ revised up its median CPI (less fresh food and energy) forecast to 2.3%, from 2.1% previously.
- Policy implications: Real interest rates remain low; BoJ may gradually raise the policy rate if the baseline outlook materializes. However, policy adjustments will be data-dependent, given high global uncertainty.
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The Bank of Japan elected to maintain its policy rate at “around 0.5%” and remains cautious as it sees global economic uncertainty rising.
- The BoJ expects underlying CPI inflation to continue to “increase gradually” as strong wage growth pushes through to consumer prices.
- Additionally, it sees elevated rice prices and the dissipation of government measures to reduce inflation as factors that will push YoY core CPI inflation higher.
- BoJ Governor Ueda in the press conference: "Japan's wage and price conditions are on track, possibly stronger than expected. But the uncertain U.S. and global outlook makes it difficult to assess the potential impact on Japan's economy…”
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- The Bank of Japan increased its short-term interest rate to 0.50% last night, up from 0.25%, by a vote of 8-1. This is the highest rates have been since the 2008 financial crisis. The decision comes as the BoJ notes that “CPI inflation is likely to be at or around 2.5% for fiscal 2025” as a result of firms’ expectations “they will continue to raise wages steadily.” Consistent with these comments is an upgrade in the 2025 forecasts for CPI less fresh food by 0.5 ppts to 2.4% and CPI less fresh food and energy by 0.2 ppts to 2.1%.
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- The BoJ held rates unchanged last night. The bank assessed that underlying CPI inflation would be at a level that is "generally consistent with the price stability target" through the end of 2024.
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