Reuters reported that Bank of Japan Governor Kazuo Ueda sees energy costs starting to feed into consumer prices, adding pressure to an outlook in which the central bank expects underlying inflation to stay near 2%.
Ueda spoke at an International Monetary Fund event in Washington on Nov. 6. Reuters said he also saw a chance that inflation would pick up further in early 2027. He described wage growth as consistent with the BOJ’s 2% goal, saying, “We are in an equilibrium with wages growing at a level consistent with 2% inflation.”
The BOJ’s October outlook separates underlying inflation from its consumer price index excluding fresh food. It expects the underlying measure to stay around 2%; CPI excluding fresh food is projected to move above 2% over the near term, then converge closer to that threshold in the latter part of the projection. The median year-on-year forecast for fiscal 2027 on that measure is 2.6%, up from 2.4% in July, within a 2.4% to 2.7% forecast range. The report judged price risks to be weighted to the upside. EconoTimes previously covered the BOJ’s fiscal 2027 forecast increase.
The BOJ listed crude oil prices, wage costs passed through to selling prices, AI-related semiconductor demand and yen depreciation among sources of price pressure. It said exchange-rate changes may affect prices more readily than in the past as businesses adjust wages and selling prices. Higher raw-material costs could weigh on company profits and households’ real income. A weaker yen may support earnings at internationally active firms while putting pressure on households and smaller companies, the BOJ said.
On Oct. 30, the BOJ set its guideline for the uncollateralized overnight call rate at around 1.25%, with eight board members voting in favor and one opposed. It said the timing and pace of further increases would depend on economic and price developments, financial conditions and risks to its outlook. The next policy meeting is scheduled for Dec. 17-18.
