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October 30, 2026BANK OF JAPAN MONETARY POLICY The Policy Board of the Bank of Japan maintained its uncollateralized overnight call rate target around 1.25%.
Japan’s economy has continued to recover moderately, although some weakness remains due to the conflict in the Middle East. Higher crude oil prices have weighed on economic activity and household purchasing power, but government support measures, accommodative financial conditions, and strong global AI-related demand continue to support growth. From fiscal 2027 onward, the Bank expects growth to pick up moderately as the effects of high energy and raw material prices fade and income gains increasingly translate into higher spending. GDP is forecasted to grow on average 0.7% in 2026 and 2027, and 0.8% in 2028.
Inflationary pressures remain elevated. Consumer price inflation (excluding fresh food) is expected to rise clearly above 2%. Several factors are pushing prices up, mainly for energy, goods, and durable goods: continued pass-through of wage increases, higher crude oil prices, rising semiconductor prices tied to AI-related demand, and past yen depreciation. With labour shortages persisting, wages and prices continue to rise together, and medium- to long-term inflation expectations are around 2%. Inflation is expected to be 2.5% in 2026, rise to 2.6% in 2027 and come down to target of 2.0% in 2028.
The Bank of Japan stated that it will continue to raise the policy interest rate and adjust the degree of monetary accommodation as warranted by developments in economic activity, inflation, and financial conditions. Policymakers emphasized the need to monitor the effects of the Middle East conflict, global AI-related demand, exchange rate movements, and the risk that inflation could exceed the 2% target. The Bank will continue to conduct monetary policy with the objective of achieving price stability sustainably and stably at 2%.
The Bank will release its next Monetary Policy meeting on December 18, 2026.
Source: Bank of Japan, Statement on Monetary Policy; Outlook for Economic Activity and Prices (October 2026)
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