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June 16, 2026BANK OF JAPAN MONETARY POLICY The Policy Board of the Bank of Japan raised its uncollateralized overnight call rate by 25 bps to around 1.0% , the first time it has been raised to this threshold since 1995.
Japan’s economy partly recovered despite the conflict in the Middle East. Higher crude oil prices have been slowing economic activity but were offset by higher corporate profits and an improvement in employment and income situation. Government initiatives that aim to reduce household burden of higher energy prices continue to provide support. Japan was also able to secure alternative sources for raw materials that are highly dependent on the Middle East. The outlook remains the same, economy to expand moderately, but at a slower pace.
CPI inflation has been below 2% target rate due to government measures to reduce higher energy prices. The increase in crude oil prices has been passing through to business-to-business prices relatively quickly, raising the risk of broader consumer price increases. Medium- to long-term inflation expectations continue to rise above the 2% stability target.
The Bank of Japan will continue to raise the policy interest rate and adjust the degree of monetary accommodation, given that inflation has been approaching 2% and the real interest rate remains very low. The Bank will respond to developments in economic activity and prices, as well as financial conditions, to sustainably achieve the price stability (2%) target.
The Bank will release their next monetary policy statement on July 31, 2026, the Outlook report will be published on the same day.
Source: Bank of Japan, Statement on Monetary Policy
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