BOJ Monetary Policy Statement

Japan's economic growth is likely to moderate, 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 be in the range of 2.5-3.0 percent for fiscal 2025, in the range of 1.5-2.0 percent for fiscal 2026, and at around 2 percent for fiscal 2027. The effects of the recent rise in food prices, such as rice prices, are expected to wane. Meanwhile, underlying CPI inflation is likely to be sluggish, mainly due to the deceleration in the economy. Thereafter, however, underlying CPI inflation is expected to increase gradually, 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. In the second half of the projection period, underlying CPI inflation is likely to 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 are more or less unchanged. The projected year-on-year rate of increase in the CPI (all items less fresh food) for fiscal 2025 is higher, mainly due to the effects of the rise in food prices. The projected rates of increase in this CPI for fiscal 2026 and 2027 are more or less unchanged. There are various risks to the outlook. In particular, it remains highly uncertain how trade and other policies in each jurisdiction will evolve and how overseas economic activity and prices will react to them. 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 econo BOJ Report: Uncertainty surrounding each country's trade negotiations, and their impact on both domestic and global economies and prices, remains elevated. BOJ REPORT: RISKS TO INFLATION OUTLOOK ROUGHLY BALANCED REAL INTEREST RATES ARE AT EXTREMELY LOW LEVELS MUST HAVE NO PRE-CONCEPTION IN JUDGING WHETHER ECONOMY, PRICES MOVING IN LINE WITH FORECAST WILL CONDUCT MONETARY POLICY AS APPROPRIATE FROM PERSPECTIVE OF SUSTAINABLY,…