Bank of Japan may raise its 2027 inflation forecast while holding rates steady
inflation forecast
A prediction for how much prices may change.
core CPI
A consumer price measure that excludes fresh food.
price pass-through
Companies putting higher costs into product prices.
What may happen
The Bank of Japan (BOJ), Japan's central bank, may raise its inflation forecast for fiscal 2027. Reuters reported this, citing four sources familiar with the BOJ's thinking. The forecast will appear in the BOJ's quarterly Outlook for Economic Activity and Prices. The meeting runs from October 29 to 30.
The BOJ is still expected to keep its policy rate unchanged. It raised rates in September. Officials want to watch that move's effects. A December hike remains possible if price pressure stays strong. These are source-based expectations, not final decisions.
Why the forecast may rise
The main change is oil. In July, the BOJ assumed Dubai crude would start near $80 a barrel. It expected the price to fall toward $70 by the end of the forecast period. Oil is now near $110. Tensions in the Middle East have lasted longer than expected.
Higher oil costs can spread through the economy. Companies may pass higher costs into product prices. This is called price pass-through. The BOJ therefore may see price growth staying high for longer.
The July forecast put FY2027 core CPI at 2.4%. Core-core CPI was 2.6%. Core CPI excludes fresh food. Core-core CPI also excludes energy. The new increases are expected to be small.
Why rates may stay unchanged
A higher forecast does not automatically mean an immediate rate hike. The BOJ is watching whether price pressure becomes persistent. It is also studying wages and price expectations.
Sources said the BOJ may judge underlying inflation to have reached about 2%. Wages are rising around 3%, which is consistent with the BOJ's 2% price goal. Yet sources also said second-round effects from oil may not be large. That reduces the case for an immediate move after September's hike.
The BOJ may still say financial conditions are accommodative. It could repeat its intention to raise rates over time. The aim would be to keep inflation around 2% on a lasting basis.
What is already known
Government measures to reduce price pressures may lower calendar-year inflation in 2026. The minimum wage rose strongly this fiscal year, but less than the previous year. Wages may keep rising next year, without a much bigger increase.
The BOJ may leave its FY2026 inflation and real GDP growth forecasts mostly unchanged. It may also exclude a possible food-tax cut. The bill has not passed, so its effect is difficult to include.
What remains uncertain
The final forecast numbers are unknown. The October rate decision is also open. The BOJ may react differently if the yen falls again and lifts import costs. The report does not settle whether December will bring another hike.
What to watch next
The October meeting and the following outlook report will provide the first official answers. Observers will also watch oil prices, the yen, wages, and inflation data. Together, those signals will show whether the BOJ sees a temporary oil shock or a lasting price trend.
Bank of Japan may raise its price forecast but keep rates steady
📰 Full story: Bank of Japan may raise its 2027 inflation forecast while holding rates steady
Oil is expensive, so Japan's price forecast may rise. The October rate may stay unchanged.
core CPI
A price measure that leaves out fresh food.
price pass-through
Companies adding higher costs to product prices.
underlying inflation
The longer-lasting direction of price changes.
💡 The gist
- The BOJ may raise its 2027 price forecast.
- It may leave its interest rate unchanged in October.
- A December rate increase is still possible.
The Bank of Japan (BOJ), Japan's central bank, will meet on October 29 and 30. It will discuss a new economic and price report. The report may show higher prices in fiscal 2027.
Oil is the main reason. In July, the BOJ expected oil to fall. It used about $80 a barrel as a starting point. It expected about $70 later. Oil is now near $110. Middle East tensions have lasted longer.
Oil is used across the economy. Higher oil costs can raise company expenses. Companies may pass those costs into product prices. This is called price pass-through. It can keep prices high for longer.
The July forecast expected core CPI to rise 2.4% in fiscal 2027. Core CPI leaves out fresh food. Another measure leaves out fresh food and energy. That measure was expected to rise 2.6%. The new forecast may increase only a little.
Why might rates stay unchanged? The BOJ raised rates in September. It wants time to see what happened. Keeping the rate unchanged means leaving it at its current level.
The BOJ may say underlying inflation is around 2%. Wages are rising about 3%. This supports its 2% price goal. But the BOJ does not see large extra effects from oil yet. So, it may wait in October.
The BOJ may still support future rate increases. It wants prices to stay near 2%. The forecast and the rate decision answer different questions. The forecast asks where prices may go. The rate decision asks what the BOJ should do now.
Government price measures may lower inflation in 2026. Minimum wage increases slowed from the previous year. Wages may keep rising next year. A food-tax cut may not enter the forecast. No bill has passed.
The final numbers are unknown. The October decision is unknown too. A December hike is possible. The BOJ will watch oil, the yen, wages, and price data next.
Bank of Japan may wait while prices rise
📰 Full story: Bank of Japan may raise its 2027 inflation forecast while holding rates steady
Japan's money setters may wait before changing the rate.
forecast
A careful guess about what may happen later.
interest rate
The extra money paid when borrowing money.
oil price
How much money oil costs.
What is this news?
The Bank of Japan (BOJ) helps set Japan's money rules. It may raise its 2027 price forecast. A forecast is a careful guess about the future. The BOJ thinks things may cost more. Oil is one reason.
In July, oil was expected to fall. It was expected to move from about $80 to $70. The oil price is now near $110. Expensive oil can make many things cost more. Companies may pass those costs to shoppers.
The BOJ raised its interest rate in September. An interest rate changes the cost of borrowing money. It may leave the rate alone on October 29 and 30. It wants to watch the last change.
A December rate rise is possible. But no decision is final. We will watch oil prices and the BOJ's new report.