Inflation | Bank of Japan: Wages and Prices Rising Moderately, Underlying Inflation Rate Accelerating Toward 2%

The Bank of Japan will hold a two-day monetary policy meeting starting Wednesday (the 18th). The market generally expects no change, maintaining the interest rate at 0.75%. BOJ Governor Kazuo Ueda stated in Parliament that the potential inflation rate is accelerating toward the central bank’s 2% target and emphasized that rising prices must be accompanied by steady wage growth.

Ueda said that as companies become more willing to pass on rising raw material and labor costs to consumers, wages and prices are rising gradually in tandem. He noted that the underlying inflation is gradually approaching the 2% target, expected to reach close to 2% during the second half of fiscal year 2026 to 2027.

Ueda emphasized that the central bank will carefully guide monetary policy to ensure Japan can sustainably and stably achieve the 2% inflation target.

He stated that long-term interest rates are basically determined by the market, and their fluctuations partly reflect market views on the economy, prices, and fiscal and monetary policy outlooks. He reiterated that if long-term rates deviate from normal market trends or rise sharply under special circumstances, the BOJ will take flexible actions and is prepared to intervene in the Japanese government bond market.