The Bank of Japan raised its median year-over-year consumer price index (CPI) forecast excluding fresh food for fiscal 2027 to 2.6%, highlighting price pressures as it kept its growth projections broadly unchanged.
The forecast compares with 2.4% in July. The BOJ projects inflation on the same measure at 2.5% in fiscal 2026 and 2.0% in fiscal 2028. The BOJ’s October assessment included the revised estimate, as EconoTimes previously reported.
In its October Outlook Report, the BOJ points to crude oil prices, companies passing wage increases into selling prices, higher semiconductor prices amid global demand for artificial intelligence and the effects of past yen depreciation. It expects inflation to ease toward 2% in the second half of the projection period as oil price effects fade. Its assumptions put Dubai crude at about $105 per barrel, declining to about $70 toward the end of that period based on futures markets.
The BOJ’s median real GDP growth forecasts are 0.7% for fiscal 2026, 0.7% for fiscal 2027 and 0.8% for fiscal 2028. It expects higher energy and raw-material prices linked to the situation in the Middle East to weigh on corporate profits and household real income. The Bank also says yen depreciation can support profits at global firms while increasing import costs for small and midsize businesses and reducing households’ purchasing power.
Labor shortages are expected to sustain wage gains, while the BOJ projects private consumption to remain roughly flat in fiscal 2026 before returning to moderate growth. It points to investment in AI, data centers and labor-saving equipment as support for growth from fiscal 2027.
The projections do not account for a proposed temporary consumption tax cut on food and beverages, which is under Diet deliberation. If the cut covered all items in the Cabinet’s September tax outline, the BOJ estimates fiscal 2027 inflation would be 1.3 percentage points lower on the CPI measure excluding fresh food and 1.4 points lower on the measure excluding fresh food and energy. The BOJ says the measure could support growth, but its effects are highly uncertain.
The Bank sees no overall tilt in the balance of economic risks, while judging that the balance of CPI risks favors a higher outcome. It says further rate increases remain its policy direction, with timing and pace to reflect activity, prices, financial conditions and related risks. The next scheduled policy meeting is Dec. 17–18, 2026.
