Bank of Japan Summary of Opinions

Commentary Monetary Policy

Source: Bank of Japan
Source Link: https://www.boj.or.jp/
Frequency: 8 time a year
Next Release(s): February 1st, 2026 6:50 PM

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Japan's economy continues to recover moderately, with wage growth accelerating and inflation rising closer to the 2% target.

Economic Outlook:
- Wage hikes in small and medium-sized firms outpaced those in large firms, though concerns remain over the sustainability of wage increases due to weaker business investment.
- Private consumption showed some weakness in January, reflecting higher food prices, but is expected to strengthen as wages rise.
- Heightened uncertainty surrounding U.S. policy risks and global economic conditions could impact Japan’s economic outlook.
Prices and Inflation:
- CPI inflation is gradually increasing and projected to align with the 2% target by late 2025.
- Food price increases, driven by higher labor costs and supply constraints, may push up inflation expectations further.
- Upward price pressures are expected to persist due to ongoing cost pass-through by firms.
Monetary Policy Decision:
- The BoJ plans to monitor the impact of recent interest rate hikes and global developments before making further policy adjustments.
- While risks to inflation and economic growth are balanced, the BoJ is prepared to adjust policy as needed, including a potential shift to a more neutral stance if inflation remains near the target.
Source
Government representatives from both the Ministry of Finance and Cabinet Office supported the policy rate change as necessary for achieving the price stability target while emphasizing the importance of clear communication and continued cooperation between the BoJ and government.

Economic Outlook:
- Japan's economy continues to recover moderately, though with some weakness in certain areas
- The economic outlook remains generally in line with March 2024 projections
- Wage hikes in spring 2025 are expected to be at least comparable to 2024 levels, supported by corporate profits and labor market conditions
- There's evidence of a shift away from the "zero norm" of stagnant wages, with more firms incorporating wage increases into their medium-term plans
Prices and Inflation:
- Underlying CPI inflation is expected to increase gradually toward the 2% target
- The output gap remains positive due to labor shortages, contributing to continued high inflation
- Both upside and downside risks to prices are significant and balanced
- There are concerns about potential stagflation if U.S. inflation resurges while global trade frictions intensify
Monetary Policy Decision:
- The BoJ judges it appropriate to raise the policy interest rate to 0.5% at this meeting
- The timing is considered "neutral" relative to market expectations
- Real interest rates are expected to remain significantly negative even after the rate hike
- Some members advocate for continued gradual rate increases if economic conditions remain on track
Key Concerns:
- The yen's depreciation impact on households and firms through cost increases
- The divergence between monetary policies of the BoJ and Federal Reserve
- The profitability gap between large firms and struggling small/medium-sized enterprises
- The need to carefully monitor "market-based prices" excluding housing rent and public services
Source