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Not to be released until 8:50 a.m.
Japan Standard Time on Monday,
August 10, 2026.
August 10, 2026
Bank of Japan
Summary of Opinions at the Monetary Policy Meeting1,2
on July 30 and 31, 2026
I. Opinions on Economic and Financial Developments
Economic Developments
⚫ Japan's economy has recovered moderately, although some weakness has been seen in part,
partly due to the impact of the situation in the Middle East. In fiscal 2026, although the rise in
crude oil prices is expected to push down economic activity , Japan's economy is expected to
continue growing moderately, albeit at a decelerated rate, supported by factors such as global
AI-related demand and various government measures. From fiscal 202 7 onward, Japan's
economic growth rate is likely to rise moderately, since it is projected that the adverse effects
of high crude oil prices will wane.
⚫ With the economy experiencing an upswing driven by the demand shock from the global
expansion in AI-related demand, the deterioration in the terms of trade reflecting higher crude
oil prices has been mitigated, and concerns over an economic slowdown have subsided.
⚫ For economic activity , the situation in the Middle East exert s downward pressure, the
expansion in AI-related demand exerts upward pressure, and the depreciation of the yen works
in both directions.
⚫ As recent reports at the meeting of general managers of the Bank's branches suggested, AI-
related demand has spread to a greater extent than expected , and private consumption has
shown resilience, as seen, for example, in strong sales of high -end products reflecting the
wealth effects from higher stock prices.
1 English translation prepared by the Bank's staff based on the Japanese original.
2 "Summary of Opinions at the Monetary Policy Meeting" is made through the following process: (1) each
Policy Board member and government representative makes a summary of op inions that she/he presented
at the Monetary Policy Meeting (MPM) under a certain word limit and submits this to the Governor of the
Bank of Japan, who serves as the chairman of the MPM, and (2) the chairman edits those opinions as his
responsibility.
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⚫ Due attention is warranted on the possibility that the economy could deviate downward, should
expectations regarding the future profitability of AI-related firms diminish and the stock market
experience significant adjustments.
⚫ In the past, Japan has experienced a significant decline in domestic demand and a deceleration
in inflation in the face of major external shocks . Nevertheless, Japan's economy has shown
resilience in the face of U.S. tariff policy and the situation in the Middle East.
⚫ The Cabinet has approved the Basic Policy on Economic and Fiscal Management and Reform
2026, which advocates "responsible and proactive public finances." This policy is expected to
raise domestic production, employment, real income, and the inflation rate.
⚫ Since June this year, there has been a significant regime shift in financial conditions
surrounding Japan, as the phase of policy interest rate cuts seen globally through last year has
turned to a phase of interest rate hikes.
Prices
⚫ Underlying CPI inflation is likely to increase gradually, as the mechanism in which wages and
prices rise moderately in interaction with each other is expected to be maintained. Underlying
CPI inflation is expected to come to a level that is generally cons istent with the price stability
target between the second half of fiscal 2026 and fiscal 2027.
⚫ Given that underlying CPI inflation has been approaching 2 percent, it will be important, from
the perspective of sustainable and stable achievement of the price stability target, to examine
whether it becomes anchored at a level around 2 percent.
⚫ For prices, the situation in the Middle East, the expansion in AI-related demand, and the
depreciation of the yen all exert upward pressure.
⚫ Given factors such as the rise in domestic distribution costs and the increase in the prices of
packaging materials and food tray s, the price hikes in final consumer goods are expected to
accelerate again toward early autumn.
⚫ While the situation in the Middle East remains unclear, crude oil prices and the benchmark
price of naphtha have declined from their peak levels reached in April. Moreover, while the
producer price index (PPI) has risen reflecting the increase in import prices , the CPI has
remained below 2 percent, due in part to the effects of government policies.
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⚫ Supply and demand conditions in the crude oil market are balanced, reflecting factors such as
an increase in supply as delayed tankers have exited the Persian Gulf. However, once these
temporary factors dissipate, supply and demand conditions could tighten again.
⚫ In addition to the depreciation of the yen, geopolitical risks and risks associated with climate
change have been factors pushing up import prices. Strong AI-related demand could also lead
to an increase in the prices of goods and services. Attention is warranted on upside risks to
prices throughout the projection period.
⚫ Considering factors such as the future pass -through of higher crude oil price s to consumer
prices, and Japan's output gap, which indicates supply shortages and excess demand, risks to
prices are significantly skewed to the upside. In addition , global AI -related demand and
expansionary fiscal policies in various economies could further boost demand and push up
prices even more.
II. Opinions on Monetary Policy
⚫ Looking at Japan's financial conditions, the short -term real interest rate -- which has a large
impact on economic activity -- has been negative, and financial institutions' lending attitudes
have remained proactive. Meanwhile, firms' and other entities' demand for funds has increased,
as shown, for example, in the acceleration in the rate of increa se in bank lending. In light of
these developments, Japan's financial conditions have remained accommodative.
⚫ In assessing financial conditions, it is also necessary to take into account factors such as
whether financing is being implemented under disciplined investment plans.
⚫ It is considered that there is a time lag of around one to one and a half years for the effects of
a policy interest rate hike to emerge in the form of pushing down the inflation rate and domestic
economic activity. In order to carefully examine the impact of the rate hike at the previous
meeting, it is appropriate for the Bank to keep the policy interest rate unchanged at this meeting.
⚫ Given that underlying CPI infl ation has been approaching 2 percent and financial conditions
have been accommodative, it is appropriate for the Bank to continue to raise the policy interest
rate and adjust the degree of monetary accommodation, in response to developments in
economic activity and prices as well as financial conditions.
⚫ It is appropriate for the Bank to consider the timing and pace of adjustment to the degree of
monetary accommodation, while carefully examining the impact of factors such as the situation
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in the Middle East, the expansion in AI-related demand, and developments in foreign exchange
rates. In doing so, the current phase calls for due attention to upside risks to the underlying
trend in prices.
⚫ In conducting monetary policy, the perspective of stabilizing underlying CPI inflation at a level
around 2 percent becomes important in order to keep the risk of underlying CPI inflation
deviating upward to a level above the price stability target of 2 percent from materializing and
thereby exerting an adverse impact on the economy afterward.
⚫ In the conduct of monetary policy, when assessing whether underlying CPI inflation will
stabilize in a manner consistent with the price stability target, it is necessary to carefully
monitor whether medium - to long -term inflation expectations -- which have been rising
recently -- stabilize at around 2 percent.
⚫ Given that underlying CPI inflation has been approaching 2 percent and greater consideration
should be given to upside risks to prices than before, it could be considered that the pace of
policy interest rate hikes will be faster than market expectations, depending on developments
in economic activity and prices as well as financial conditions.
⚫ Underlying CPI inflation in Japan is becoming anchored at around 2 per cent. With financial
conditions remaining accommodative, it is important for the Bank to pay particular attention
to upside risks to prices and adjust the policy interest rate nimbly.
⚫ Even if the precise neutral interest rate cannot be determined, it is ne cessary for the Bank to
raise the policy interest rate, which is below the lower bound of the broadly estimated range,
in order to set a foundation for the normalization of monetary policy and to ensure the
nimbleness of policy decisions.
⚫ As the global environment is turning to a phase of policy interest rate hikes, the situation has
shifted to a new phase in which the Bank needs to adopt a nimble ap proach in response to
factors such as changes in overseas financial conditions and to discuss the size of a rate hike,
rather than adhering to a certain pace of rate hikes. As concerns over a downward deviation in
real economic activity have subsided and inflationary pressures could become evident from the
summer, it is necessary for the Bank to shift from the current stance of encouraging a rise in
underlying inflation and to clearly demonstrate to the market its determination to prevent
upward deviations in prices.
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⚫ Should upside risks to prices materialize, it would not only deliver a significant blow to Japan's
economy and to people's daily lives but would also compel the Bank to later make rapid and
substantial policy interest rate hikes, causing a double shock. The focus of monetary policy has
shifted from "lifting underlying CPI inflation to 2 percent" to "avoiding further upward
deviation in underlying CPI inflation." It cannot be said that "the risk of waiting is marginal,"
and it is therefore necessary for the Bank to accelerate the pace of adjustment to the degree of
monetary accommodation.
⚫ While long-term interest rates rose in early July, policies in various countries have attracted
attention in financial markets recently as a factor influencing daily market movements.
III. Opinions from Government Representatives
Ministry of Finance
⚫ Regarding the 2026 Kumamoto Earthquake, the government will mobilize its full capabilities,
with saving lives as its highest priority.
⚫ Based on the Basic Policy on Economic and Fiscal Management and Reform 2026, the
government will strive to achieve both "building a strong Japanese economy" and "fiscal
sustainability" in an integrated manne r, while giving consideration to securing market
confidence.
⚫ The government expects the Bank to conduct monetary policy as appropriate toward
sustainable and stable achievement of the price stability target of 2 percent, while closely
cooperating with the government , paying due attention to factors such as economic
developments at home and abroad, and communicating effectively with the market.
Cabinet Office
⚫ The government will closely monitor the impact of the 2026 Kumamoto Earthquake on the
livelihoods of those affected and on the economy.
⚫ As the economy and public finances are entering a new phase, the government will strive to
secure market confidence through achieving both building a strong Japanese economy and
fiscal sustainability in a simultaneous manner and through strengthening communication,
based on the Ba sic Policy on Economic and Fiscal Management and Reform 2026 and
embracing an approach of responsible and proactive public finances.
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⚫ Toward building a strong Japanese economy, it is extremely important that monetary policy be
conducted as appropriate in a manner that contributes to achieving stable inflation. The
government expects the Bank to conduct monetary policy as appropriate toward achieving the
price stability target of 2 percent in a sustainable and stable manner, while closely cooperating
with the government.