The Bank of Japan (BoJ) may lift its fiscal 2027 inflation forecast as rising oil costs weigh on households’ purchasing power, Reuters reported, citing four people familiar with the bank’s thinking.
The bank’s July outlook projected median economic growth of 0.6% in fiscal 2026 and 0.8% in fiscal 2027. Reuters’ sources expect those estimates to remain broadly unchanged in October, with demand for AI-related exports making up for subdued household spending.
The July outlook put inflation excluding fresh food at 2.5% for fiscal 2026 and 2.4% for fiscal 2027. Reuters reported that the fiscal 2027 figure could rise slightly as higher crude prices reach consumers. The bank has not released an October forecast.
The BoJ said in July that costlier oil can reduce households’ real income and company profits. It also said a weaker yen can help firms with global operations while raising import costs for households and smaller businesses. Reuters’ sources said a renewed decline in the yen that drives up import costs could affect the October rate decision.
The four sources expect the BoJ to keep its overnight rate around 1.25% at the Oct. 29-30 meeting. Reuters said continued attention to inflation risks could leave room for another increase as soon as December. EconoTimes previously covered expectations for an October pause.
In its Sept. 18 decision, following a Sept. 17-18 meeting, the BoJ raised its overnight rate guideline from around 1% to 1.25% by a 7-2 vote. The change took effect Sept. 24. The bank said it would keep raising the policy rate, judging the timing and pace against economic activity, prices, financial conditions and risks to its outlook.
The BoJ is scheduled to publish The Bank’s View portion of its October Outlook Report on Oct. 30 and the full report Nov. 2. Its following policy meeting is set for Dec. 17-18.
