The Bank of Japan kept its policy rate around 1.25% on Friday and judged underlying inflation generally consistent with its 2% target, while forecasting CPI excluding fresh food above 2% in fiscal 2026 and 2027.
The assessment is separate from the government’s published consumer price index (CPI), which tracks prices paid by households. In September, the index rose 2.1% from a year earlier both overall and excluding fresh food; a measure that also removes energy increased 2.4%, the Statistics Bureau of Japan said. These figures describe published CPI categories, while the BOJ’s October outlook gives the bank’s assessment of underlying inflation.
The BOJ expects underlying inflation to remain around 2%. Its median projection for CPI excluding fresh food is 2.5% in fiscal 2026, 2.6% in fiscal 2027 and 2.0% in fiscal 2028. The bank expects the measure to rise clearly above 2% before easing toward that level in the second half of its projection period.
Japan’s 2% target dates to a joint statement in January 2013 that connected the BOJ’s work with the government’s economic policy. The BOJ linked higher semiconductor and related prices to global AI-related demand. It cited crude oil prices and the yen’s depreciation as other factors that could push consumer prices higher.
Higher energy and materials prices could also squeeze companies’ earnings and reduce households’ purchasing power, the BOJ said. The bank said it would continue raising its policy rate, weighing the outlook for economic activity and prices alongside financial conditions when deciding the timing and pace of further moves. Its October outlook gave no date or pace for the next increase.
The next policy meeting is scheduled for Dec. 17–18, 2026. EconoTimes previously covered how September’s inflation readings kept the BOJ’s rate debate open.
