The Bank of Japan maintained its policy rate at around 0.75% in March 2026, signaling continued gradual normalization as inflation remains near target and the economy sustains moderate growth momentum.

• The Policy Board voted 8–1 to keep the uncollateralized overnight call rate at around 0.75%, indicating a steady policy stance with one dissent favoring a higher rate of 1.0%.

• Japan’s economy is described as recovering moderately, with corporate profits remaining high and business investment continuing to increase, while exports and industrial production have been broadly flat.

• Private consumption has remained resilient, supported by improving employment and income conditions, though price increases have weighed somewhat on household spending.

• CPI inflation (ex fresh food) has been running above 2% YoY but recently eased to around 2%, reflecting the impact of government measures to offset higher energy costs and a partial moderation in food price pressures.

• Inflation is expected to temporarily fall below 2% YoY before rising again due to higher crude oil prices, suggesting near-term volatility followed by renewed upward pressure on prices.

• Wage and price dynamics are strengthening, with firms continuing to pass through higher wages to prices and inflation expectations rising moderately, supporting a gradual increase in underlying inflation.

• Financial conditions remain accommodative with significantly negative real interest rates, indicating that overall policy settings continue to support economic activity despite prior rate increases.

• The Bank highlighted risks tied to Middle East tensions, energy prices, global economic developments, and domestic wage-setting behavior, while reiterating that further rate hikes are likely if the outlook for growth and inflation is realized.