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August 5, 2026.

August 5, 2026

Bank of Japan

Minutes of the

Monetary Policy Meeting

on June 15 and 16, 2026

(English translation prepared by the Bank's staff based on the Japanese original)

Please contact the Secretariat of the Policy Board, Bank of Japan, in advance, to request

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A Monetary Policy Meeting of the Bank of Japan Policy Board was held in the Head

Office of the Bank of Japan in Tokyo on Monday, June 15, 2026, from 2:00 p.m. to 3:57 p.m.,

and on Tuesday, June 16, from 9:00 a.m. to 12:12 p.m.1

Policy Board Members Present

HIMINO Ryozo, Chairman, Deputy Governor of the Bank of Japan2

UCHIDA Shinichi, Deputy Governor of the Bank of Japan

NAKAGAWA Junko

TAKATA Hajime

TAMURA Naoki

KOEDA Junko

MASU Kazuyuki

ASADA Toichiro

Government Representatives Present

NAKATANI Shinichi, State Minister of Finance, Ministry of Finance3

MAEDA Tsutomu, Deputy Vice -Minister for Policy Planning and Coordination,

Ministry of Finance4

KIUCHI Minoru, Minister of State for Economic and Fiscal Policy, Cabinet Office5

HAYASHI Sachihiro, Vice-Minister for Policy Coordination, Cabinet Office4

MIZUTA Yutaka, Deputy Director General for Economic and Fiscal Management,

Cabinet Office6

1 The minutes of this meeting were approved by the Policy Board at the Monetary Policy Meeting

held on July 30 and 31, 2026, as "a document describing an outline of the discussion at the meeting"

stipulated in Article 20, paragraph 1 of the Bank of Japan Act of 1997. Those present are referred to

by their titles at the time of the meeting.

2 Ueda Kazuo, Governor of the Bank of Japan, was absent. Due to his absen ce, Himino Ryozo

performed the duties of the chairman pursuant to Article 16, paragraph 5 of the Bank of Japan Act.

Ueda Kazuo submitted his written opinion via the chairman, in accordance with Article 5, paragraph

2 of the Rules concerning Policy Board Meetings.

3 Present on June 16.

4 Present on June 15.

5 Present on June 16 from 9:06 a.m. to 12:12 p.m.

6 Present on June 16 from 9:00 a.m. to 9:05 a.m.

Reporting Staff

KAMIYAMA Kazushige, Executive Director

SUWAZONO Kenji, Executive Director

MASAKI Kazuhiro, Executive Director (Assistant Governor)

NAKAMURA Koji, Executive Director

OKUNO Akio, Director-General, Monetary Affairs Department

IDE Joji, Head of Policy Planning Division, Monetary Affairs Department

SUZUKI Koichiro, Director -General, Financial System and Bank Examination

Department

MINEGISHI Makoto, Director-General, Financial Markets Department

KAWAMOTO Takuji, Director-General, Research and Statistics Department

SUGO Tomohiro, Associate Director-General, Research and Statistics Department

CHIKADA Ken, Director-General, International Department

Secretariat of the Monetary Policy Meeting

FUKUDA Eiji, Director-General, Secretariat of the Policy Board

MIURA Yukihiro, Director, Deputy Head of Planning and Coordination Division,

Secretariat of the Policy Board

YAGI Tomoyuki, Senior Economist, Monetary Affairs Department

FUKUSHIMA Shunsuke, Senior Economist, Monetary Affairs Department

I. Summary of Staff Reports on Economic and Financial Developments7

A. Market Operations in the Intermeeting Period

The Bank had been conducting money market operation s in accordance with the

guideline for money market operations decided at the previous meeting on April 27 and 28,

2026.8 The uncollateralized overnight call rate had been in the range of 0.726 to 0.728

percent.

Meanwhile, the Bank had conducted Japanese government bond (JGB) purchases

of about 2.7 trillion yen per month in accordance with the JGB reduction plan decided at the

June 2025 meeting.

B. Recent Developments in Financial Markets

In the money market, the uncollateralized overnight call rate had been at around

0.75 percent. The general collateral (GC) repo rate had been at around the same level as the

uncollateralized overnight call rate. As for interest rates on term instruments, yields on three-

month treasury discount bills (T-Bills) had increased.

The Tokyo Stock Price Index (TOPIX) had risen in line with stock prices in the

United States and Europe. Yields on 10-year JGBs had increased, mainly due to inflationary

pressure reflecting the situation in the Middle East and to a wait -and-see approach among

investors in view of uncertainties. The liquidity indicators in the JGB markets continued to

improve on the whole. In the foreign exchange market, the yen had been more or less flat

against the U.S. dollar over the intermeeting period, although it had appreciated temporarily.

The yen had appreciated against the euro, as the euro had depreciated against the U.S. dollar.

C. Overseas Economic and Financial Developments

Overseas economies had grown moderately on the whole, although some weakness

had been seen in part, partly due to the impact of the situation in the Middle East. The U.S.

economy maintained solid growth on the whole, although some weakness had been seen in

part. European economies remained resilient, particularly in domestic demand, although

some weakness had been seen in part. The Chinese economy had picked up recently, mainly

7 Reports were made based on information available at the time of the meeting.

8 The guideline was as follows:

The Bank will encourage the uncollateralized overnight call rate to remain at around 0.75

percent.

supported by an increase in exports, although consumption had lacked momentum. Growth

in emerging and commodity-exporting economies other than China had improved moderately

on the whole, although some weakness had been seen in part.

As for the outlook, overseas economies were expected to come under downward

pressure for the time being due to the impact of factors such as the situation in the Middle

East. Thereafter, however, based on the assumption that the impact of the situation in the

Middle East would ease, overseas economies were projected to continue growing moderately,

partly supported by global AI -related demand. Regarding the outlook, attention was

warranted for the time being on the future course of the situation in the Middle East and on

how this would affect gl obal financial markets and the global economy; in addition, there

remained high uncertainties, for example, over developments in global AI -related demand

and over the impact of trade policy in each jurisdiction.

With respect to overseas financial markets, although market participants continued

to pay attention to uncertainties surrounding the situation in the Middle East, market

sentiment had improved, partly due to robust performance by AI -related firms. Although

uncertainties surrounding the situation in the Middle East remained, U.S. and European stock

prices had risen over the intermeeting period, mainly due to robust performance by AI-related

firms. Long-term interest rates in the United States had risen, as market expectations of a

policy interest rate hike had increased, given higher inflationary pressure due to the situation

in the Middle East and given solid economic indicators. Long -term interest rates in Europe

had been more or less flat. Meanwhile, currencies in emerging economies had been more or

less flat on the whole. Crude oil prices continued to be at high levels, with the de facto closure

of the Strait of Hormuz remaining in effect, although they had declined relative to the levels

seen at the time of the previous meeting, due to expectations of progress in negotiations

between the United States and Iran.

D. Economic and Financial Developments in Japan

1. Economic developments

Japan's economy had recovered moderately, although some weakness had been seen

in part, partly due to the impact of t he situation in the Middle East. Regarding the outlook,

the economy was likely to decelerate for a time. This was because, although solid global AI-

related demand and the government's various measures were likely to provide support, the

economy was expected to be pushed down by a deterioration in the terms of trade reflecting

the surge in energy and raw material prices.

Exports continued to be more or less flat as a trend, as downward effects due to the

situation in the Middle East and upward effects due to global AI-related demand had offset

each other. Regarding the outlook, exports were likely to remain more or less flat for the time

being. This was because, while solid global AI -related demand was expected to push up

exports of IT-related goods and capital goods in particular, it was expected that a decline in

exports of automobiles to the Middle East and a decline in the capacity utilization rate in the

basic materials industry, both reflecting the situation in the Middle East, would push down

overall exports.

Industrial production continued to be more or less flat from a somewhat long -term

perspective. Regarding the outlook, industrial production was expected to remain more or

less flat on the whole. This was because, although underpinned by solid global AI-related

demand and resilience in business fixed investment supported by economic measures,

industrial production was expected to come under downward pressure from production

adjustments in the basic materials industry and other industries, reflecting the situation in the

Middle East.

Corporate profits had been at high levels against the backdrop of a solid increase in

global AI-related demand. Under these circumstances, business fixed investment had been on

a moderate increasing trend. Regarding the outlook, the growth momentum in business fixed

investment was highly likely to decelerate gradually. This was because higher energy and raw

material prices and a rise in construction costs were likely to exert greater downward pressure

on business fixed inves tment, although moves to clear order backlogs from existing

investment projects were likely to provide support.

Private consumption had been resilient against the background of an improvement

in the employment and income situation, although weakness had be en seen in household

sentiment. The consumption activity index (CAI; real, travel balance adjusted) had increased

for the January-March quarter of 2026, and had also increased substantially for April, relative

to that quarter, mainly for durable goods. Bas ed on anecdotal information from firms,

statistics published by industry organizations, and high -frequency indicators, the growth

momentum in private consumption since May seemed to be maintained. Consumer sentiment

had deteriorated sharply, reflecting the unstable situation in the Middle East and a rise in

gasoline prices, but this deterioration in sentiment had recently been coming to a halt as

households' inflation outlook had declined slightly. Regarding the outlook, growth in private

consumption was highly likely to decelerate for the time being, mainly reflecting a decline in

real purchasing power due to price rises, particularly for goods prices, although the

government's economic measures introduced so far and its measures to reduce the household

burden of higher energy prices were likely to provide support.

Labor market conditions remained tight. Under these circumstances, the

employment and income situation had improved moderately. The year -on-year rate of

increase in the number of employed persons had recently accelerated to around 1 percent.

Nominal wages per employee continued to increase steadily, albeit with fluctuations. With

regard to the outlook, employee income was likely to continue to see a steady increase at its

current pace for the time being, albeit with fluctuations.

As for prices, in international commodity markets, crude oil prices had seen a rapid

and significant rise, against the background of the growing instability of the situation in the

Middle East. Subsequently, these prices had been decreasing, while continuing to fluctuate at

high levels. Copper prices had followed a clear uptrend, despite being affected by the situation

in the Middle East. Meanwhile, market prices of food had recently started rising, albeit

slightly. The year-on-year rate of increase in the producer price index (PPI) had accelerated

markedly, pushed up by a significant rise in prices of petroleum and coal products, and of

chemicals and related products -- reflecting the impact of the situation in the Middle Ea st --

as well as by an increase in prices of nonferrous metals and machinery due to the rise in global

AI-related demand. The year -on-year rate of increase in the services producer price index

(SPPI, excluding international transportation) had been on a de celerating trend, being at

around 2.5 percent recently, due to factors such as the dissipation of the impact of the price

hikes seen in the previous fiscal year, although the rate itself remained relatively high, mainly

on the back of a rise in personnel expenses. With moves to pass on wage increases to selling

prices continuing, the year-on-year rate of increase in the consumer price index (CPI, all items

less fresh food) had been above 2 percent, partly due to the effects of the rise in food prices,

such as rice prices; however, the rate of increase had recently been at around 1.5 percent due

to factors such as the effects of the government's measures to reduce the household burden of

higher energy prices. Inflation expectations had risen moderately. With regard to the outlook,

the year-on-year rate of increase in the CPI was likely to be pushed down in the short run by

the government's measures to reduce the household burden of higher energy prices. However,

the rate of increase in the CPI was expected to then come under upward pressure again, as

the effects of price rises in energy and raw materials that reflected the situation in the Middle

East and other factors were likely to spread mainly to goods prices.

2. Financial environment

Japan's financial conditions had been accommodative.

Real interest rates had been negative. Firms' funding costs had increased. Firms'

demand for funds had increased on the back of, for example, the recovery in economic activity

as well as mergers and acquisitions of firms. With regard to credit supply, financial

institutions' lending attitudes as perceived by firms had been accommodative. Issuance

conditions for CP and corporate bonds had been favorable. In this situation, the year-on-year

rate of increase in the amou nt outstanding of bank lending had been in the range of 6.0 -6.5

percent; that in the aggregate amount outstanding of CP and corporate bonds had been at

around 8 percent. Firms' financial positions had been favorable. The number of bankruptcies

of firms had been more or less flat.

Meanwhile, the year-on-year rate of change in the money stock had been at around

2.5 percent.

II. Summary of Discussions by the Policy Board on Economic and Financial

Developments

A. Economic and Price Developments

With regard to global financial and capital markets, members shared the view that,

although market participants continued to pay attention to uncertainties surrounding the

situation in the Middle East, market sentiment had improved, partly due to robust

performance by AI -related firms. One member noted that stock prices had been renewing

historical highs in many economies, mainly because business performance was expected to

improve globally due to an expansion in business fixed investment on the back of AI-related

demand, an d this had contributed to mitigating the deterioration in the terms of trade

reflecting higher crude oil prices.

Members shared the recognition that overseas economies had grown moderately on

the whole, although some weakness had been seen in part, partly due to the impact of the

situation in the Middle East. As for the outlook, members agreed that overseas economies

were expected to come under downward pressure for the time being due to the impact of

factors such as the situation in the Middle East. They c ontinued that, thereafter, however,

based on the assumption that the impact of the situation in the Middle East would ease,

overseas economies were projected to continue growing moderately, partly supported by

global AI -related demand. One member expressed the recognition that concerns over a

significant economic downturn reflecting the situation in the Middle East had subsided

compared with a while ago, as large -scale disruptions in supply chains had not occurred,

including in the NIEs and ASEAN economies, which are highly dependent on energy

resources from the Middle East. The member continued that, meanwhile, many economies

had been mindful of inflation risks, with crude oil prices remaining high.

Members agreed that the U.S. economy maintained solid grow th on the whole,

although some weakness had been seen in part. One member expressed the view that the

growth rate had risen partly due to the expansion in AI-related demand and tax cuts pushing

up the economy, and employment had been heading toward a recov ery recently, thereby

continuing to boost growth in the economy.

Members shared the recognition that European economies remained resilient,

particularly in domestic demand, although some weakness had been seen in part.

Members shared the view that the Chinese economy had picked up recently, mainly

supported by the increase in exports, although consumption had lacked momentum.

Members shared the recognition that growth in emerging and commodity-exporting

economies other than China had improved moderately on the whole, although some weakness

had been seen in part. One member noted that it was necessary to closely monitor

developments in individual economies, as the level of the impact of the situation in the Middle

East and how emerging economies benefited from an expansion in AI-related demand varied

across these emerging economies.

Based on the above deliberations on economic and financial conditions abroad,

members discussed the state of Japan's economy.

With regard to economic activity, members shared the v iew that Japan's economy

had recovered moderately, although some weakness had been seen in part, partly due to the

impact of the situation in the Middle East. Many members expressed the recognition that the

risk of a significant slowdown in the economy had not materialized thus far, as evidenced by

developments such as robust corporate profits supported mainly by strong AI-related demand,

solid wage increases, and progress in various government measures and in securing

alternative sources of raw materials. In this regard, some members expressed the view that

Japan's economy had been developing generally in line with the baseline scenario presented

in the April 2026 Outlook for Economic Activity and Prices (Outlook Report), in which the

economy was expected to maintain a virtuous growth cycle, albeit at a decelerated pace. One

member stated that, with overseas economies experiencing an upswing driven by the demand

shock from the global expansion of AI-related demand, the deterioration in the terms of trade

reflecting higher crude oil prices had been mitigated, and concerns over an economic

slowdown had subsided.

As for the outlook for economic activity , members shared the recognition that

Japan's economy was expected to continue growing moderately since it was likely to be

underpinned by factors such as high levels of profits in the corporate sector, the government's

various measures, and accommodative financial conditions, although economic growth was

likely to decelerate, mainly due to the deterioration in the terms of trade reflecting higher

crude oil prices. They continued that the economic growth rate was likely to rise moderately

thereafter, since it was projected that the adverse effects of high crude oil prices would wane

and that a virtuous cycle from income to spending would gradually intensify. Most members

expressed the recognition that progress had been made since the previous meeting in securing

alternative sources of supply for raw materials that are highly dependent on the Middle East,

supported by various efforts made by the public and private sectors. These members

continued that, given this, the possibility of supply -side constraints intensifying and thereby

significantly affecting the production activity of Japanese firms had decreased. One of these

members expressed the view that, while some items had been purchased at high prices to

build up inventories due to uncertainties over future procurement, such moves were unlikely

to have an impact on the overall economy since they had been limited to harder-to-source

items, such as paint.

Members shared the recognition that exports and industrial production continued to

be more or less flat as a trend. One member noted that, on the back of strong AI -related

demand, industrial production had recentl y been driven by IT -related goods and exports to

the United States and Asia had been resilient.

Members shared the recognition that business fixed investment had been on a

moderate increasing trend, with corporate profits being at high levels against the backdrop of

the increase in global AI-related demand.

Members concurred that private consumption had been resilient against the

background of the improvement in the employment and income situation, although weakness

had been seen in household sentiment. Some members pointed out that a stable employment

and wage environment, reflecting favorable business performance, and the effects of income

transfers to households, mainly brought about by the government's measures to reduce the

household burden of higher energy prices, had been supporting private consumption despite

price increases. One of these members expressed the view that, with the scheduled

government subsidies to address the upcoming rise in electricity charges due to higher

liquefied natural gas (LNG) prices, a decrease in households' appetite for spending could be

avoided.

Members shared the view that the employment and income situation had improved

moderately. Many members expressed the recognition that, with corporate profits being at

high levels, the wage growth rate agreed in the 2026 annual spring labor -management wage

negotiations had been at around 5 percent not only for large firms but also for relatively small

firms, indicating that solid wage increases had been achieved for the third consecu tive year.

One of these members added that, although there had been concerns that small and medium-

sized firms could become cautious in raising wages due to the impact of the situation in the

Middle East, the results of the annual spring labor-management wage negotiations continued

to show solid responses recently, contrary to expectations. In relation to this point, one

member pointed out that, given that many firms cite developments in their profits as the most

important factor in wage revisions, it was n ecessary to continue carefully examining the

impact downward pressure on corporate profits reflecting high crude oil prices had on the

momentum for wage hikes. The member also noted that, as recruiting and retaining

employees was another important factor i n wage hikes, it was crucial to examine corporate

activities and wage-setting trends from various aspects, such as the actual situation of mergers

and acquisitions and discontinuations of businesses due to labor shortages, and developments

in wage hikes accompanied by job changes.

As for prices, members agreed that, with moves to pass on wage increases to selling

prices continuing, the year-on-year rate of increase in the CPI (all items less fresh food) had

been above 2 percent, partly due to the effects of the rise in food prices, such as rice prices.

They continued that, however, the rate of increase had recently been at around 1.5 percent

due to factors such as the effects of the government's measures to reduce the household burden

of higher energy prices . One member expressed the view that, while the rise in food prices

had leveled off recently, consumer prices as a whole had been generally in line with the Bank's

outlook in the April 2026 Outlook Report, considering factors such as a recent rise in the

number of items increasing in price. Some members pointed out that the year-on-year rate of

increase in the CPI excluding the effects of various government measures had been in the

range of 2-3 percent. On this basis, these members expressed the recognition that, although

such measures had the effect of influencing households' perceived inflation by adjusting the

price levels of specific goods and services, they needed to be excluded when assessing the

level of underlying inflation. One of these members note d that, while the inflation rate of

around 1.5 percent might be close to households' perceived inflation, it was also necessary to

pay attention to the fact that prices of items not covered by subsidies continued to increase at

a considerably rapid pace. O n this basis, the member pointed out that, considering factors

such as recent price increases in business -to-business transactions, the figure of around 1.5

percent had, in a sense, masked the true state of inflation, which had started to rise.

Regarding price developments in business-to-business transactions, most members

agreed that the year-on-year rate of increase in the PPI recently marked a high rate of over 6

percent, and at the upstream and midstream stages in the supply chain, the price pass-through

stemming from high crude oil prices had been progressing at a relatively fast pace. One of

these members pointed out that recent developments in the corporate goods price index

(CGPI) clearly showed the direct effects of high crude oil prices, as seen in a surge in prices

of basic chemical products in the upstream, such as naphtha and ethylene, in April 2026,

followed by a notable increase in May in prices of basic materials and processed products in

the midstream, such as synthetic resins and plastic pro ducts. A different member expressed

the recognition that, looking at the earnings announcements of firms in the upstream and at

anecdotal information, input price increases had been passed on to selling prices more quickly

in the current phase than when input prices had risen in the past. One member expressed the

view that price increases had already been observed at the downstream stage even for goods

other than energy and food. The member continued that the price increases were, to some

extent, a reflection of the pass-through of cost increases driven by the recent depreciation of

the yen.

Meanwhile, members concurred that inflation expectations had risen moderately.

One member pointed out that medium - to long-term inflation expectations had shown signs

of shifting as indicated by, for example, the break -even inflation (BEI) rate -- which shows

market participants' inflation expectations -- rising to a level above 2 percent and the spread

between short- and long-term interest rates widening. One member expressed the recognition

that the inflation expectations of firms and households had already risen to around 2 percent.

A different member said that the year-on-year rate of increase in the CPI had recently been at

around 1.5 percent, mainly due to the effect s of various government measures, and this had

contributed to containing a rise in people's inflation expectations. The member continued that,

however, future developments in inflation expectations warranted close attention.

With regard to the outlook for prices, members shared the recognition that the year-

on-year rate of increase in the CPI (all items less fresh food) was likely to accelerate to a level

clearly above 2 percent, as the rise in crude oil prices was expected to push up prices, mainly

of energy and goods, with moves to pass on wage increases to selling prices continuing. They

continued that, thereafter, with the waning of the effects of high crude oil prices, the rate of

increase was expected to decline toward around 2 percent. In addition, members agreed that,

meanwhile, with a sense of labor shortage continuing to be strong, it was projected that the

mechanism in which wages and prices rise moderately in interaction with each other would

be maintained, and that medium- to long-term inflation expectations would rise. On this basis,

most members shared the recognition that underlying CPI inflation was expected to increase

gradually, coming to a level that was generally consistent with the price stability target

between the second half of fiscal 2026 and fiscal 2027 and remaining at around that level

thereafter. In response, one member expressed the recognition that the level of the rate of

increase in the CPI, including underlying CPI inflation, already had generally reached the

price stability target. Furthermore, a different member expressed the view that underlying

CPI inflation already had been at a level that was generally consistent with the price stability

target of 2 percent.

Regarding projections for the CPI, most members expressed the recognition that the

price pass -through stemming from the rise in crude oil prices had been progressing at a

relatively fast pace in business-to-business transactions, which could spread to an increase in

consumer prices across a wide range of items. A few members expressed the view that, based

on sources such as recent media reports on price hikes and anecdotal information from firms,

it was expected that the number of items with price hikes would increase at the downstream

consumer level by around summer. These members continued that the CPI was therefore

highly likely to be pushed up considerably through the second half of fiscal 2026. One

member stated that, if business performance and stock prices maintained a certain level of

robustness, both prices hikes and inflationary pressure were likely to continue, with the effects

of such robustness spilling over. Meanwhile, one member expressed the view that, even if the

conflict in the Middle East ends and crude oil prices decline, inflationary pressur e would

remain, taking into account the higher costs, such as for shipping and storage, associated with

the procurement of alternative sources of supply. In addition, a different member expressed

the recognition that procurement costs for crude oil were li kely to remain elevated; this was

because it was likely to take time to fully ensure safe passage through the Strait of Hormuz

even after the end of the conflict, and because the sources of crude oil were expected to be

diversified over time to include the United States and other regions.

As for risks to economic activity and prices, members agreed that, for the time being,

it was necessary to pay particular attention to the impact of the future course of the situation

in the Middle East on financial and fo reign exchange markets and on Japan's economic

activity and prices. Members shared the view that various developments had been observed

with regard to the situation in the Middle East, such as both the United States and Iran

announcing that they had agreed on a memorandum of understanding regarding issues such

as the cessation of the conflict. They continued that uncertainties remained nevertheless,

including over the future pace of recovery in logistics.

On this basis, regarding the impact of the situation in the Middle East on Japan's

economic activity, most members agreed that, while higher crude oil prices had so far been

exerting downward pressure on economic activity, the risk of a significant slowdown in the

economy had decreased compared with a while ago, mainly taking into account that the

economy had generally been supported by factors such as high levels of corporate profits,

that the effects of the government's various measures would continue to provide support, and

that progress had been made in securing alternative sources of supply for raw materials that

are highly dependent on the Middle East. One member pointed out that progress in securing

alternative sources of supply for items such as crude oil and naphtha was now more evident

in data than at the time of the April meeting. The member continued that the risk of supply -

side constraints for raw materials intensifying substantially had decreased, partly due to the

agreement aimed at bringing the conflict in the Middle East to an end.

As for the impact of the situation in the Middle East on prices in Japan, most

members concurred that the price pass-through stemming from high crude oil prices had been

progressing at a relatively fast pace in business-to-business transactions, which could spread

to an increase in consumer prices across a wide range of items. These members continued

that, against this backdrop, taking into account that medium - to long -term inflation

expectations also continued to rise, there was a risk of underlying inflation deviating upward

to a level above the price stability target of 2 percent. Many members expressed the

recognition that the impact of the rise in crude oil prices was already spreading to midstream

business-to-business prices. These members continued that, in this situation, more concern

was warranted about the risk that this could lead to a rise in prices, given that firms' price -

setting behavior was becoming more active. Some members expressed the view that, with

firms' wage- and price-setting behavior becoming more active, there was an increasing risk

that more firms would start passing on to selling prices not only cost increases due to the rise

in crude oil prices, but also increases in personnel expenses and shipping costs thus far,

resulting in consumer price s rising higher than projected. Noting that the SPPI for motor

freight transportation had recently risen significantly, one of these members pointed out that

such an increase in distribution costs could affect underlying inflation, since the increase

would spread widely to other prices. A different member noted that attention was warranted

on whether price rises in packaging materials reflecting high crude oil prices would lead firms

to raise selling prices more than was necessary to cover increases in input costs. One member

expressed the recognition that, compared with the period when commodity prices surged

following Russia's invasion of Ukraine, there had been some changes; for example, the

employment and income situation had improved, firms' and househo lds' inflation

expectations had increased, and firms' price -setting behavior had become more active. The

member continued that, considering this and other factors, such as the fact that labor market

conditions had tightened to a greater extent than could b e explained by the changes in the

output gap, upside risks to prices were now significantly higher than they had been in that

period. On this basis, the member added that there was also a risk of medium - to long-term

inflation expectations in Japan rising significantly above 2 percent, since they were not as

anchored to around 2 percent as in Europe and the United States.

Meanwhile, regarding spillovers from price rises to wages, a few members noted

that the possibility of a wage -price spiral in Japan was not high, given the relationship

between labor and management in the country. On this basis, one of these members expressed

the view that, although there was no need so far for concern about a double -digit inflation

rate, according to anecdotal information from firms, many of them planned to maintain their

stance on solid wage increases in the spring 2027 wage negotiations, from the perspective of

recruiting and retaining employees and investing in human capital, even if their business

performance deteriorated due to the impact of the situation in the Middle East. The member

continued that price rises could therefore exert second -round effects on wages to a certain

extent.

Based on these discussions, most members expressed the view that, while the

situation in the Middle East had pushed economic activity down and prices up, given the

current circumstances, it was necessary to pay closer attention to the upside risks to prices

than the downside risks to economic activity. In response, one member expressed the

recognition that, although an agreement aimed at ending the conflict in the Middle East had

been reached, looking at the supply shocks caused by the conflict, the downside risks to

production and employment were greater than the upside risks to prices. The member then

pointed out that the downside risks to production and employment might disrupt the virtuous

cycle between wages and prices, and in the worst -case scenario, this could potentially cause

Japan's economy, which appeared to have overcome a pro longed period of deflation and

transitioned to an inflationary phase, to fall back into deflation again.

With regard to major risks other than those arising from the situation in the Middle

East, members agreed that it was necessary to pay attention to the effects of developments in

global AI-related demand and of future developments in foreign exchange rates on Japan's

economic activity and prices. A few members expressed the recognition that global AI-related

demand could be pushing up economic activity and prices more than expected. One of these

members expressed the view that, even if crude oil prices declined in the future, it was highly

possible that the upward deviation in prices would start to spread across a wider range of

items, including to those other than petroleum -related goods, as supply and demand

conditions for items such as semiconductor memory chips and copper tightened, reflecting

demand shocks -- particularly those related to AI -- stemming from overseas developments.

B. Financial Developments

Members agreed that financial conditions in Japan had been accommodative. Many

members noted that real interest rates had been negative, mainly in the short- to medium-term

zone. These members continued that firms' and other entities' demand for funds had increased,

and issuance conditions for CP and corporate bonds remained favorable. One of these

members commented that, with inflation expectations showing signs of shifting, the negative

real interest rate had led to an increase in lending and CP is suance and a rise in asset prices.

Some members noted that firms' financial positions and financial institutions' lending

attitudes were unchanged despite the policy interest rate hikes so far. These members

continued that growth in bank lending had accele rated further, mainly due to an overall

increase in demand for funds reflecting the recovery in economic activity, and to some

funding needs being fueled by active mergers and acquisitions of firms. One of these members

pointed out that bank lending had seen its highest growth since 2000, excluding extraordinary

periods such as the COVID -19 pandemic. The member then stated that it was necessary to

carefully grasp the background to this growth, including the growth in real estate lending.

III. Staff Reports on a Plan for the Outright Purchases of JGBs

The staff first explained their assessment of the developments in and functioning of

the JGB markets, as follows.

(1) With progress in reducing the Bank's purchase amount of JGBs, the diffusion index (DI)

for the degree of bond market functioning in the latest May 2026 Bond Market Survey

clearly narrowed within negative territory and showed an improvement; it reached

broadly the same level as in the February 2025 survey, which was the peak level seen just

before the DI deteriorated significantly in negative territory triggered by the

announcement of U.S. tariff policy. Inter -dealer transaction volume in the JGB cash

market had followed an uptrend. Bid -ask spreads for on -the-run cash JGBs had not

widened notably, even amid relatively large fluctuations in 10-year JGB yields.

(2) An improvement in market functioning had also been seen for off-the-run JGBs. In terms

of the yield curve, while there was previously a dip in yields in the 7-10 year zone, where

the share of the Bank's holdings was particularly high, this distortion had recently largely

dissipated, mainly because factors such as the reduction in the Bank's repurchase amount

of JGBs under the Securities Lending Facility (SLF) had contributed to an increase in the

amount of JGBs available in the markets. In a situation where the Bank's presence in the

JGB markets was decreasing, not only for on -the-run but also for off -the-run JGBs, the

usage of the SLF had been at a low level recently.

(3) Based on these deve lopments, it could be assessed that, with progress in reducing the

Bank's purchase amount of JGBs, the functioning of the JGB markets had been steadily

improving.

The staff then reported market participants' views on the developments in and

functioning of the JGB markets and a plan for the Bank's outright purchases of JGBs, views

which were collected at the Bond Market Group Meeting held on May 21 and 22, 2026.

(1) As for the developments in the JGB markets, some participants assessed that supply and

demand conditions had eased due to factors such as investors' cautious investment stance,

which mainly reflected their expectations of further interest rate increases. Even in this

situation, however, many participants were of the opinion that the functioning of the JGB

markets had followed an improving trend; as background to this, they pointed out that the

reduction in the Bank's JGB purchases and the series of measures concerning the SLF had

proved to be effective.

(2) Regarding the current plan for the reduction of the Bank's purchase amount of JGBs, there

were few calls for modification.

(3) As for the Bank's JGB purchases from April 2027 , there were both opinions that the

reduction of its purchase amount should be halted and that it should be continued . The

opinion that the reduction should be halted was hardly heard in 2025, but was heard to a

considerable extent in 2026, although it could not be said that this was the majority view.

Participants who were of this opinion factored in that the amount out standing of the

Bank's JGB holdings and the outstanding balance of current accounts at the Bank would

decrease steadily, even if the reduction of JGB purchases were to be halted; they also

pointed to the impact on supply and demand conditions for JGBs if t he reduction was

continued. On the other hand, with respect to the opinion that the reduction of JGB

purchases should be continued, there were comments that the Bank should maintain the

current pace of reduction even from April 2027 onward, or that it was appropriate to slow

the pace of reduction; some participants were of the opinion that the Bank should

eventually aim at making the purchase amount zero, although this was a minority view.

(4) In addition, regarding the Bank's conduct of JGB purchases, some participants commented

that it was appropriate for the Bank to continue carrying out regular reviews, while others

were of the opinion that there was no need for it to conduct interim assessments as it had

been doing thus far, requesting a shift to making purchases "in a more autopilot manner."

Meanwhile, there continued to be calls for the Bank to make nimble responses as

necessary by, for example, conducting unscheduled purchases of JGBs.

On this basis, taking account of factors such as the aforementioned developments in

and functioning of the JGB markets and views from market participants, the staff explained

that the plan for the outright purchases of JGBs could be as follows.

(1) In principle, long -term interest rates were to be formed in financial mar kets, and it was

appropriate for the Bank to conduct the purchases of JGBs in a predictable manner, while

allowing enough flexibility to support stability in the JGB markets.

(2) With progress in reducing the Bank's purchase amount of JGBs, the functioning of the

JGB markets had been steadily improving, and the need to further improve market

functioning through the reduction of the Bank's purchase amount had been decreasing

gradually.

(3) On the other hand, if the Bank's JGB holdings decreased, the amount o f JGBs held by

market participants would increase accordingly. It would take some time for investors in

Japan, including banks and individual investors, to smoothly increase their JGB holdings.

If the current pace of reduction were to be continued, this mi ght have an unforeseen

impact on market stability.

(4) From this viewpoint, the plan could be designed as follows.

(a) With regard to the amount and pace of purchases , the Bank would maintain the

reduction plan decided in June 2025 until January-March 2027 and reduce the planned

amount of its monthly purchases of JGBs by, in principle, about 200 billion yen each

calendar quarter; from April 2027, the amount of its monthly purchases of JGBs would

be about 2 trillion yen.

(b) As for the amount of purchases in each maturity segment , the Financial Markets

Department would set the amount as appropriate , taking account of developments in

the JGB markets.

responses by, for examp le, increasing the amount of JGB purchases and conducting

fixed-rate purchase operations of JGBs -- both of which could be done regardless of

the monthly schedule of JGB purchases -- and the Funds-Supplying Operations against

Pooled Collateral.

(d) The Bank would not conduct interim assessments of the plan for the outright purchases

of JGBs in the future. However, the Bank was prepared to amend the pace of its JGB

purchases at the Monetary Policy Meetings, if deemed necessary, taking into account

the basic thinking on the purchases of JGBs and other factors such as developments in

the JGB markets.

IV . Summary of Discussions on Monetary Policy

Members discussed monetary policy based on the above assessment of economic

and financial developments as well as the staff reports on the plan for the outright purchases

of JGBs.

Members first exchanged views on the guideline for money market operations for

the intermeeting period.

Based on the discussions on economic and financial developments, most members

shared the recognition that Japan's economy had been developing generally in line with the

baseline scenario presented in the April 2026 Outlook Report and that, on the price front,

there was a risk that underlying CPI inflation would deviate upward to a level above the price

stability target of 2 percent. In terms of the real economy, most members shared the

recognition that, while higher crude oil prices had been exerting downward pressure on

economic activity, the economy had generally been supported by the high levels of corporate

profits and the improvement in the employment and income situation. These members

continued that the risk of a significant slowdown in the economy appeared to have decreased

compared with a while ago because of the effects of t he government's initiatives, including

measures to reduce the household burden of higher energy prices, and of progress in securing

alternative sources of supply for raw materials that are highly dependent on the Middle East.

On the price front, most members concurred that there was a risk of underlying CPI inflation

deviating upward to a level above the price stability target of 2 percent, given (1) the

possibility that the relatively fast pace of progress in price pass -through in business -to-

business tran sactions stemming from high crude oil prices could spread to an increase in

consumer prices across a wide range of items, as well as (2) the continued rise in medium- to

long-term inflation expectations. Based on this recognition, one member expressed the view

that it was appropriate to adjust the policy interest rate at this meeting, taking into account

the following: although the risk of heightened supply -side constraints had abated since the

previous meeting, owing to progress in securing alternative sou rces of supply and to the

agreement aimed at bringing the conflict in the Middle East to an end, the future course of

the situation in the Middle East remained uncertain and the impact of the situation on logistics

persisted, and thus there was a risk of price increases. Noting that import prices had also been

driven up by exchange rate developments, one member added that such price increases were

considered to place a burden on the business of a considerable number of firms, including

small and micro firms, and that, against this backdrop, it had become more appropriate than

before to adjust the degree of monetary accommodation. A different member expressed the

recognition that, while Japan's real interest rates were particularly low, compared to other

economies, there were concerns over further upward deviation in prices, and it was therefore

necessary to adjust the level of real interest rates.

Based on the above discussions, most members shared the recognition that it was

appropriate for the Bank to raise the policy interest rate by 0.25 percentage points to around

1.0 percent at this meeting, from the perspective of sustainable and stable achievement of the

price stability target of 2 percent. These members also shared the recognition that the

following points were appropriate: (1) in order to implement this change, the interest rate

applied to the complementary deposit facility would be 1.0 percent; and (2) the basic loan

rate would also be raised by 0.25 percentage points to 1.25 percent.

On this basis, most members shared the recognition that accommodative financial

conditions would be maintained even if the Bank decided to raise the policy interest rate at

this meeting. Some members expressed the view that, taking into consideration factors such

as the level of real interest rates after raising the policy interest rate, as well as firms' and

households' funding conditions, the rate hike discussed at this meeting was an adjustment

within the Bank's accommodative policy, and that the policy interest rate a nd monetary

accommodation would likely continue to firmly support Japan's economy. One of these

members pointed out that gradually bringing the policy interest rate closer to the neutral level

would lead to stability in economic activity and prices in the long run. In this regard, a few

members said that, although accommodative financial conditions would be maintained after

the change in the policy interest rate, there were some views pointing out the negative effects

of policy rate hikes, and that, in this situation, it was necessary for the Bank to continue to

carefully assess how financial conditions would change with the rise in interest rates. One of

these members pointed out that most of the households with mortgages were in the working

generation, and around half of them were families with children. The member then noted that,

when considering the effects of rate hikes on households, it was necessary to assess

comprehensively, based not only on differences in household attributes, but also on rises in

deposit interest rates and on the effects of measures such as policies concerning the provision

of free education, among others. Meanwhile, a few members expressed the recognition that

raising the policy interest rate with the aim of achieving price stabil ity would lead to

stabilizing long -term interest rates, taking into account that the recent rise in long -term

interest rates was mainly attributable to heightened concerns over inflation due to factors such

as the effects of the situation in the Middle East.

Meanwhile, a different member expressed the view that the Bank should hold the

policy interest rate steady at this point; this was because, regarding the impact of the situation

in the Middle East, downside risks to production and employment were consid ered by the

member to be greater than upside risks to prices, and, in this situation, raising the policy

interest rate could suppress aggregate demand by curbing firms' business fixed investment,

potentially inducing simultaneous declines in inflation and in production and employment.

As for the future conduct of monetary policy , members concurred that, given that

underlying CPI inflation had been approaching 2 percent and financial conditions had been

accommodative, it was appropriate that the Bank 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. They shared the recognition that, in this

regard, it was important for the Ban k to consider the timing and pace of adjustment, while

closely monitoring the impact of the future course of the situation in the Middle East on

Japan's economic activity and prices and examining the likelihood of realizing the baseline

scenario of the out look for economic activity and prices and the risks to the outlook. Some

members expressed the view that financial conditions were expected to remain

accommodative after the policy interest rate hike at this meeting. These members continued

that, therefore, if economic activity and prices developed in line with its outlook, the Bank

should maintain its stance to continue to raise the policy interest rate. One member expressed

the recognition that, unlike in the United States and Europe, Japan's policy inter est rate

remained below the estimated range of the neutral interest rate, and that it was necessary to

bring the policy rate closer to the neutral rate as soon as possible and thereby ensure the

flexibility needed to swiftly adjust the policy rate in either direction. A different member said

that, to avoid rapid and significant policy interest rate hikes in the future, the Bank should

bring the policy rate closer to the neutral rate sooner. On this basis, the member expressed the

view that Japan's neutral rate appeared to be at around 2 percent, and taking this into account,

it was desirable to assess economic activity and prices as well as financial developments and

to consider whether to raise the policy interest rate as appropriate with intervals of a few

months in mind. Meanwhile, with respect to part of the description regarding the future

conduct of monetary policy in the policy statement, one member noted that, given the policy

interest rate adjustment at this meeting and factors such as the dispersion in estimates of the

neutral rate, it was appropriate to revise the wording "real interest rates are at significantly

low levels." In relation to this, a different member stated that it was reasonable to change this

wording to "financial conditions have be en accommodative," given that the Bank had been

assessing the degree of monetary accommodation by examining not only the level of real

interest rates but also a wide range of indicators related to financial conditions.

Members then discussed the plan for the outright purchases of JGBs.

Members concurred that, in principle, long-term interest rates were to be formed in

financial markets, and that it was appropriate for the Bank to conduct the purchases of JGBs

in a predictable manner, while allowing enough f lexibility to support stability in the JGB

markets. Based on this, they shared the recognition that, from the viewpoint of giving

consideration to the predictability of the Bank's future purchases of JGBs, it was appropriate

for the Bank to present the planned amount of its monthly purchases of JGBs from April 2027,

in addition to the planned amount of monthly purchases until March 2027. Furthermore,

members agreed that, to ensure flexibility in its plan, it was appropriate that, as in the past, in

the case of a rapid rise in long -term interest rates, the Bank make nimble responses by, for

example, increasing the amount of JGB purchases, which could be done regardless of the

monthly schedule of JGB purchases.

Members then considered the specific purchase amo unt of JGBs. First, as for the

treatment of the Bank's JGB purchases until March 2027, they agreed that it was appropriate

for the Bank to maintain the reduction plan decided in June 2025 and reduce the planned

amount of its monthly purchases of JGBs by, in principle, about 200 billion yen each calendar

quarter. Some members expressed the recognition that there was no reason to change the plan,

as the majority of market participants had supported maintaining it even amid a rise in long-

term interest rates, and also in view of prioritizing the predictability of the Bank's JGB

purchases.

Next, members discussed the treatment of the Bank's JGB purchases from April

2027, while taking into consideration two factors: improvement of market functioning and

stability of the JGB markets. Most members pointed out that, with progress in reducing the

Bank's purchase amount of JGBs, the functioning of the JGB markets had been steadily

improving, and that the need to further improve market functioning through the reduction of

the Bank's purchase amount had been decreasing gradually. In addition, most members shared

the recognition that, if the Bank's JGB holdings decreased, the amount of JGBs held by

market participants would increase accordingly. These members continued that, given that it

would take some time for investors in Japan, including banks and individual investors, to

smoothly increase their JGB holdings, if the current pace of reduction were to be continued,

this might have an unforeseen impact on market stability . On this basis, these members

expressed the view that, from April 2027, it was appropriate to halt the reduction of the Bank's

purchase amount of JGBs and conduct JGB purchases of about 2 trillion yen per month. One

of these members expressed the view tha t, even if the reduction of the Bank's purchase

amount of JGBs were to be halted, the purchase amount would be below 20 percent of the

issuance amount, and it was therefore unlikely that this would hamper market functioning

whereby long -term interest rates were formed freely in the market. The member then

commented that, even if the reduction were halted, given that the amount of the Bank's

purchases prior to the Global Financial Crisis -- when unconventional monetary policy was

not in place -- was just under 20 percent of the amount of JGBs issued, it could be said that

the purchase amount would return to the normal level. One member noted that supply

pressure in the JGB markets had been at historical levels with the reduction of the Bank's

purchase amount of JGBs. The member then expressed the view that, with market functioning

rapidly recovering and real interest rates in the long - and super-long-term zones being at a

level comparable to those overseas, it was appropriate to halt the reduction of the purch ase

amount of JGBs from April 2027. A different member expressed the recognition that it was

appropriate to halt the reduction of the Bank's purchase amount from the perspective of

maintaining downward pressure on long-term interest rates through the stock effect from the

Bank's JGB holdings as much as possible. Another member expressed the recognition that

the Bank should discontinue the current framework for the reduction of its purchase amount

of JGBs at the end of fiscal 2026, and that, from fiscal 2027, it should enter a phase of stably

proceeding with the redemption of its JGB holdings while keeping the scale of JGB purchases

at levels lower than in the past. The member then pointed out that, even in this case, for the

next several years, the amount of redemption would remain at least double the amount of

purchases. In relation to this, one member stated that, even if the reduction of the Bank's

purchase amount of JGBs was halted, in the case where the average maturity and other

conditions of its JGB pu rchases remained unchanged, the Bank's share of JGB holdings

relative to the aggregate amount outstanding would eventually be considerably compressed

due to redemption at maturity. On this basis, many members noted that, even in the case where

the reduction of the purchase amount of JGBs was halted, the size of the Bank's balance sheet

would steadily decrease, and that it was desirable to explain this clearly to the public.

In response to these discussions, one member expressed the opinion that the Bank

should allow long-term interest rates to be determined by the market and its participants, and

that the level of amount outstanding of its JGB holdings should be normalized as soon as

possible. The member continued that it was therefore appropriate that the B ank reduce the

amount of its monthly outright purchases of JGBs by about 200 billion yen each calendar

quarter until January -March 2028 in principle. The member noted that the purpose of the

Bank's past large-scale JGB purchases was monetary easing, and there was no need for such

purchases under the current circumstances. The member then expressed the recognition that

no disruptions had occurred in the JGB markets, and there was no reason at all to halt the

reduction of the purchase amount. Furthermore, the member added that, if the intention

behind the Bank's JGB purchases was perceived by the market as fiscal financing or as an

attempt to lower long-term interest rates, this could lead to bias in the market and undermine

the credibility of the Bank. On this point, some members expressed the recognition that it was

necessary to explain clearly that a halt of the reduction of the JGB purchase amount was a

measure aimed at preventing the JGB markets from becoming unstable so that economic

activity would not be adversely affected and the Bank's aim was not to support government

financing. In addition, one member expressed the view that, although it was necessary to

support stability in the markets, it should be made clear that the Bank would discuss the

specific pace of its JGB purchases from the viewpoint of avoiding sudden movements in the

markets following the termination of large-scale monetary easing, and that the Bank did not

aim at controlling long-term interest rates or the yield curve.

Meanwhile, a few members expressed the opinion that, while making changes to the

pace of JGB purchases was not expected at this point, it was desirable that the Bank indicate

the possibility of doing so in advance, taking into account such factors as market

developments and the views of market participants. Based on these discussions, members

agreed that it was appropriate to announce that -- although the Bank would not conduct

interim assessments of the plan for the outright purchases of JGBs in the future, taking into

consideration the balance between predictability and flexibility -- the Bank was prepared to

amend the pace of its JGB purchases at its meetings, if deemed necessary, taking into account

the basic thinking on the purchases of JGBs and other factors such as dev elopments in the

JGB markets.

Members also discussed the Bank's strategy regarding its balance sheet. One

member expressed the recognition that it had been pointed out overseas that an excessively

large central bank balance sheet was problematic in terms o f excessive supply of money,

unclear links with fiscal policy as a result of continued purchases of sovereign bonds by the

central bank, and the magnitude of interest rate risks borne by the central bank. The member

continued that, from this perspective, it was important to reduce the size of the Bank's balance

sheet steadily. One member said that the amount of reserve balances needed in the financial

system might have increased due to changes in the financial environment, such as the

tightening of regulations and digitalization. The member continued that, in the future, taking

into account factors such as economic and financial conditions at the time, the Bank would

need to examine the appropriate size of reserve balances. A different member expressed the

recognition that, if the level of the Bank's reserve balances continued decreasing, this process

would enable the Bank to further deepen its specific analysis of the optimal size of its balance

sheet, including the analysis of the impact on the money market. Another member expressed

the view that, after the amount of the Bank's JGB holdings declined to a level generally

considered appropriate, in a growing economy, it would be appropriate for the Bank to start

increasing the size of its balance sheet at a pa ce that was generally proportionate to the

nominal GDP growth rate. In addition, a few members noted that the main issue so far

regarding the Bank's JGB purchases had been the size of its purchases, but the maturity

composition of its purchases would becom e more important in the future in terms of the

possible impact on its balance sheet. Based on these discussions, some members expressed

the recognition that the Bank would need to take time to consider the desirable size of its

balance sheet and the compos ition of its assets and liabilities, while taking into account

changes in the amount outstanding of its JGB holdings and developments in the economic

and financial environment.

V . Remarks by Government Representatives

Based on the above discussions, the government representatives requested that the

chairman adjourn the meeting. The chairman approved the request. (The meeting adjourned

at 11:12 a.m. and reconvened at 11:29 a.m.)

The representative from the Cabinet Office made the following remarks.

(1) The Japanese economy was recovering at a moderate pace, while it was necessary to

closely monitor the impact of the situation in the Middle East.

(2) It was important for the Bank to fulfill its accountability regarding the policy interest rate

hike at this meeting, while taking responsible and appropriate action in the event of

excessive fluctuations in economic activity. The transition to a growth-oriented economy

was crucial, and it was necessary to carefully examine the relationship between

macroeconomic supply-demand conditions and price developments.

(3) Regarding the purchase of JGBs, it was necessary for the Bank to examine the

macroeconomic impact of the reduction in the size of its balance sheet and to take

appropriate action for market stability.

(4) The government expected the Bank to conduct monetary policy as appropriate, including

the aforementioned points, based on an understanding of the initiatives taken by the

Takaichi Cabinet such as strategic investments that enhanced resilience against potential

crises and investments that promoted growth.

The representative from the Ministry of Finance made the following remarks.

(1) The government expected 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.

(2) Regarding the proposals, the government expected the Bank to make decisions at this

meeting as appropriate. As for the change in the policy interest rate, the government

expected the Bank to explain its policy intention carefully to the market and other

stakeholders, and to carefully examine factors such as the impact this change had on

economic activity and prices. With respect to the purchase of JGBs, the government

expected the Bank to closely monitor market developments and to make nimble responses

as necessary.

VI. Votes

A. Vote on the Guideline for Money Market Operations

Based on the above discussions, to reflect the majority view of the members, the

chairman formulated the following proposal on the guideline for money market operations

and put it to a vote.

The Policy Board decided the proposal by a majority vote.

The Chairman's Policy Proposal on the Guideline for Money Market Operations:

The guideline for money market operations for the intermeeting period will be as follows.

The Bank will encourage the uncollateralized overnight call rate to remain

at around 1.0 percent.

V otes for the proposal: HIMINO Ryozo, UCHIDA Shinichi, NAKAGAWA Junko,

TAKATA Hajime, TAMURA Naoki, KOEDA Junko, and MASU Kazuyuki.

V otes against the proposal: ASADA Toichiro.

Absent: UEDA Kazuo.

Asada Toichiro dissented, considering that, regarding the impact of the situation in

the Middle East, downside risks to production and employment were greater than upside risks

to prices, and it was desirable for the Bank to maintain the guideline for money market

operations.

B. Vote on a Change in the Interest Rate Applied to the Complementary Deposit Facility

etc.

To reflect the majority view of the members, the chairman formulated the following

proposal on a change in the interest rate applied to the complementary deposit facility etc.

and put it to a vote.

The Policy Board decided the proposal by a majority vote and agreed that the

amendment to "Principal Terms and Conditions of Complementary Deposit Facility" should

be made public promptly after the meeting.

The Chairman's Policy Proposal on a Chang e in the Interest Rate Applied to the

Complementary Deposit Facility etc.:

The interest rate applied to the complementary deposit facility will be as follows, and the

"Principal Terms and Conditions of Complementary Deposit Facility" will be amended.

The interest rate applied to the complementary deposit facility will be 1.0

percent per annum.

V otes for the proposal: HIMINO Ryozo, UCHIDA Shinichi, NAKAGAWA Junko,

TAKATA Hajime, TAMURA Naoki, KOEDA Junko, and MASU Kazuyuki.

V otes against the proposal: ASADA Toichiro.

Absent: UEDA Kazuo.

Asada Toichiro dissented for the same reason as he opposed the proposal regarding

the guideline for money market operations.

C. Vote on a Change in the Basic Discount Rate and the Basic Loan Rate

To reflect the majority view of the members, the chairman formulated the following

proposal on a change in the basic discount rate and the basic loan rate and put it to a vote.

The Policy Board decided the proposal by a majority vote.

The Chairman's Policy Proposal on a Change in the Basic Discount Rate and the Basic

Loan Rate:

The basic discount rate for discounting of bills pursuant to Article 33, paragraph 1, item (i)

of the Bank of Japan Act and the basic loan rate for loans made pursuant to Article 33 ,

paragraph 1, item (ii) of the Act will be as follows.

The basic discount rate and the basic loan rate will be 1.25 percent per

annum.

V otes for the proposal: HIMINO Ryozo, UCHIDA Shinichi, NAKAGAWA Junko,

TAKATA Hajime, TAMURA Naoki, KOEDA Junko, and MASU Kazuyuki.

V otes against the proposal: ASADA Toichiro.

Absent: UEDA Kazuo.

Asada Toichiro dissented for the same reason as he opposed the proposal regarding

the guideline for money market operations.

D. Vote on the Plan for Outright Purchases of JGBs

To reflect the majority view of the members, the chairman formulated a proposal on

the plan for the Bank's outright purchases of JGBs, shown in Attachments 3 and 4.

Tamura Naoki, however, considered that the Bank should allow long -term interest

rates to be determined by the market and its participants, and proposed that the Bank reduce

the amount of its monthly outright purchases of JGBs by about 200 billion yen each calendar

quarter until January-March 2028 in principle.

The proposals submitted by the chairman and Tamura Naoki were put to a vote in

the order of Tamura Naoki's proposal, followed by the chairman's proposal.

Tamura Naoki's proposal on the plan for the outright purchases of JGBs was

defeated by a majority vote.

V otes for the proposal: TAMURA Naoki.

V otes against the proposal: HIMINO Ryozo, UCHIDA Shinichi, NAKAGAW A

Junko, TAKATA Hajime, KOEDA Junko, MASU Kazuyuki, and ASADA Toichiro.

Absent: UEDA Kazuo.

The chairman's proposal on the plan for the outright purchases of JGBs was decided

by a majority vote.

V otes for the proposal: HIMINO Ryozo, UCHIDA Shinichi, NAKAGAWA Junko,

TAKATA Hajime, KOEDA Junko, MASU Kazuyuki, and ASADA Toichiro.

V otes against the proposal: TAMURA Naoki.

Absent: UEDA Kazuo.

E. Discussion on the Statements Entitl ed "Change in the Guideline for Money Market

Operations" and "Plan for the Outright Purchases of Japanese Government Bonds"

On the basis of the above discussions, members discussed two statements: one

regarding the change in the guideline for money market operations, and one regarding the

Bank's outright purchases of JGBs. Takata Hajime expressed opposition to the description

regarding the outlook for prices in the former, considering that the level of the rate of increase

in the CPI, including under lying CPI inflation, already had generally reached the price

stability target. Tamura Naoki also expressed opposition to the description regarding the

outlook for prices, considering that underlying CPI inflation already had been at a level that

was generally consistent with the price stability target.

Based on this discussion, the chairman formulated the statements "Change in the

Guideline for Money Market Operations" -- which included a note explaining that Takata

Hajime and Tamura Naoki had each opposed a part of the text -- and "Plan for the Outright

Purchases of Japanese Government Bonds," and put them to a vote. The Policy Board decided

the text of each by a unanimous vote. It was confirmed that the statements would be released

immediately after the meeting (see Attachments 1-4).

VII. Approval of the Minutes of the Monetary Policy Meeting

The Policy Board approved unanimously the minutes of the Monetary Policy

Meeting of April 27 and 28, 2026, for release on June 19.

Attachment 1

June 16, 2026

Bank of Japan

Change in the Guideline for Money Market Operations

1. At the Monetary Policy Meeting held today, the Policy Board of the Bank of Japan decided, by

a 7-1 majority vote, to set th e following guideline for money market operations for the

intermeeting period: [Note]

The Bank will encourage the uncollateralized overnight call rate to remain at around 1.0

percent.9

2. In accordance with the change in the guideline for money market operations, the Bank decided,

by a 7-1 majority vote, to change the interest rates applied to its measures.10 [Note]

(1) Interest rate applied to the complementary deposit facility

The interest rate applied to the complementary deposit facility (the interest rate applied to

current account balances held by financial institutions at the Bank, excluding required

reserve balances) will be 1.0 percent.11

(2) Basic loan rate12

The basic loan rate applicable under the complementary lending facility will be 1.25

percent.

3. 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 (see Attachment 2). While higher

crude oil prices have been exerting downward pressure on economic activity, the economy has

generally been supported by factors such as high levels of corporate profits and an

9 The new guideline for money market operations will be effective from June 17, 2026.

10 The new interest rate applied to the c omplementary deposit facility and the new basic loan rate will be

effective from June 17, 2026.

11 The interest rates applied to the Funds-Supplying Operation to Support Financial Institutions in Disaster

Areas and the Funds-Supplying Operations to Support Financing for Climate Change Responses continue to

be the interest rate applied to the complementary deposit facility.

12 The basic loan rate is stipulated in Article 15, paragraph 1, item (ii) of the Bank of Japan Act. The basic

discount rate in item (i) i n the same paragraph also will be 1.25 percent (discounting of bills is currently

suspended).

improvement in the employment and income situation. Meanwhile, the risk of a significant

slowdown in the economy appears to have decreased compared with a while ago. This is mainly

because the effects of the government's various measures including those to reduce the

household burden of higher energy prices will continue to provide support, and progress has

been made in securing alternative sources of supply for raw materials that are highly dependent

on the Middle East. Against this backdrop, Japan's economy has been developing generally in

line with the baseline scenario, which expects that th e economy will continue growing

moderately, albeit at a decelerated rate.

On the price front, the year-on-year rate of increase in the consumer price index (CPI, all items

less fresh food) has recently been at a level below 2 percent due to factors such as the effects

of the government's measures to reduce the household burden of higher energy prices. However,

the price pass -through stemming from the rise in crude oil prices has been progressing at a

relatively fast pace in business -to-business transactions, which could spread to an increase in

consumer prices across a wide range of items. Against this backdrop, taking into account that

medium- to long -term inflation expectations have also continued to rise, there is a risk of

underlying CPI inflation deviating upward to a level above the price stability target of 2 percent.

Japan's financial conditions have been accommodative. Real interest rates have been negative,

mainly in the short - to medium-term zone. Firms' and other entities' demand for funds has

increased. Issuance conditions for CP and corporate bonds have also remained favorable.

In view of these developments in economic activity and prices as well as financial conditions,

the Bank judged it appropriate to adjust the degree of monetary accommodatio n from the

perspective of sustainable and stable achievement of the price stability target of 2 percent.

Accommodative financial conditions are expected to be maintained after the change in the

policy interest rate, continuing to firmly support economic activity.

4. As for the future conduct of monetary policy, given that underlying CPI inflation has been

approaching 2 percent and financial conditions have been accommodative, the Bank will

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. In

this regard, it will consider the timing and pace of adjustment, while closely monitoring the

impact of the future course of the situation in the Middle East on Japan's economic activity and

prices and examining the likelihood of realizing the baseline scenario of the outlook for

economic activity and prices and the risks to the outlook. With the price stability target of 2

percent, the Bank will conduct monetary policy as appropriate from the perspective of

sustainable and stable achievement of the target.

[Note] V oting for the action: HIMINO Ryozo, UCHIDA Shinichi, NAKAGAW A Junko, TAKA TA Hajime,

TAMURA Naoki, KOEDA Junko, and MASU Kazuyuki. V oting against the action: ASADA Toichiro.

Absent: UEDA Kazuo. Asada Toichiro dissented, considering that, regarding the impact of the situation

in the Middle East, downside risks to production and employment were greater than upside risks to

prices, and it was desirable for the Bank to maintain the guideline for money market operations.

Attachment 2

Economic Activity and Prices in Japan: Current Situation and Outlook

1. 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. Overseas economies have grown

moderately on the whole, although some weakness has been seen in part. Exports and industrial

production have continued to be more or less flat as a trend. Corporate profits have been at

high levels against the backdrop of a solid increase in global AI-related demand. Under these

circumstances, business fixed investment h as been on a moderate increasing trend. Private

consumption has been resilient against the background of an improvement in the employment

and income situation, although weakness has been seen in household sentiment. On the other

hand, housing investment has been on a declining trend. Public investment has continued to be

more or less flat. Meanwhile, labor market conditions have remained tight. Financial conditions

have been accommodative. On the price front, with moves to pass on wage increases to selling

prices continuing, the year-on-year rate of increase in the consumer price index (CPI, all items

less fresh food) had been above 2 percent, partly due to the effects of the rise in food prices,

such as rice prices; however, the rate of increase has recently been at around 1.5 percent due to

factors such as the effects of the government's measures to reduce the household burden of

higher energy prices. Inflation expectations have risen moderately.

2. Japan's economic growth is likely to decelerate, since the rise in crude oil prices reflecting the

impact of the situation in the Middle East is expected to push down corporate profits and

households' real income through factors such as a deterioration in the terms of trade. However,

the economy is expected to continue growing moderately, albeit at a decelerated rate, since it

is likely to be underpinned by factors such as the government's various measures and

accommodative financial conditions, in addition to developments such as continued high levels

of profits in the corporate sector. Japan's economic growth rate is likely to rise moderately

thereafter, since it is projected that the adverse effects of high crude oil prices will wane and

that a virtuous cycle from income to spending will gradually inte nsify. The year-on-year rate

of increase in the CPI (all items less fresh food) is likely to accelerate to a level clearly above

2 percent, as the rise in crude oil prices is expected to push up prices, mainly of energy and

goods, with moves to pass on wage increases to selling prices continuing. Thereafter, with the

waning of the effects of high crude oil prices, the rate of increase is expected to decline toward

around 2 percent. Meanwhile, with a sense of labor shortage continuing to be strong, it is

projected that the mechanism in which wages and prices rise moderately in interaction with

each other will be maintained, and that medium - to long-term inflation expectations will rise.

In this situation, underlying CPI inflation is expected to increase gradu ally, coming to a level

that is generally consistent with the price stability target between the second half of fiscal 2026

and fiscal 2027 and remaining at around that level thereafter. [Note]

3. There are various risks to the outlook. For the time being, i t is necessary to pay particular

attention to the impact of the future course of the situation in the Middle East on financial and

foreign exchange markets and on Japan's economic activity and prices. In addition, it is

necessary to pay attention to the ef fects of developments in global AI -related demand and of

future developments in foreign exchange rates on Japan's economic activity and prices.

[Note] Takata Hajime opposed the description regarding the outlook for prices, considering that the level of the

rate of increase in the CPI, including underlying CPI inflation, already had generally reached the price

stability target. Tamura Naoki opposed the description regarding the outlook for prices, considering that

underlying CPI inflation already had been at a level that was generally consistent with the price stability

target.

Attachment 3

June 16, 2026

Bank of Japan

Plan for the Outright Purchases of Japanese Government Bonds

At the Monetary Policy Meeting (MPM) held today, the Policy Board of the Bank of Japan reviewed

the developments in and functioning of the Japanese government bond (JGB) markets and discussed

its approach to future JGB purchases.

In principle, long-term interest rates are to be formed in financial markets, and it is appropriate for

the Bank to conduct the purchases of JGBs in a predictable manner, while allowing enough

flexibility to support stability in the JGB markets.

Based on this thinking, with a view to improvement of market functioning and stability of the JGB

markets, the Bank decided, by a 7-1 majority vote, to conduct the outright purchases of JGBs as

follows. [Note]

1. The Bank will reduce the planned amount of its monthly purchases of JGBs by, in principle,

about 200 billion yen each calendar quarter until January -March 2027. From April 2027, the

amount of its monthly purchases of JGBs will be about 2 trillion yen (see Attachment 4).

2. In the case of a rapid rise in long-term interest rates, the Bank will make nimble responses by,

for example, increasing the amount of JGB purchases and conducting fixed -rate purchase

operations of JGBs -- both of which can be done regardless of the monthly schedule of JG B

purchases -- and the Funds-Supplying Operations against Pooled Collateral.

3. The Bank will not conduct interim assessments of the plan for the outright purchases of JGBs

in the future. However, the Bank is prepared to amend the pace of its JGB purchases at the

MPMs, if deemed necessary, taking into account the basic thinking on the purchase s of JGBs

and other factors such as developments in the JGB markets.

[Note] Voting for the action: HIMINO Ryozo, UCHIDA Shinichi, NAKAGAW A Junko, TAKA TA Hajime,

KOEDA Junko, MASU Kazuyuki, and ASADA Toichiro. V oting against the action: TAMURA Naoki.

Absent: UEDA Kazuo. Tamura Naoki considered that the Bank should allow long-term interest rates to

be determined by the market and its participants, and proposed that the Bank reduce the amount of its

monthly outright purchases of JGBs by about 200 billion yen each calendar quarter until January-March

2028 in principle. The proposal was defeated by a majority vote.

Attachment 4

Amount of Monthly Outright Purchases of Japanese Government Bonds

Amount of outright purchases of Japanese

government bonds (JGBs)

April-June 2026 About 2.7 trillion yen

July-September 2026 About 2.5 trillion yen

October-December 2026 About 2.3 trillion yen

January-March 2027 About 2.1 trillion yen

From April 2027 onward About 2 trillion yen

Note: The schedule for the outright purchases of JGBs, including the purchase size per auction

by residual maturity and dates, will continue to be announced in the "Quarterly Schedule

of Outright Purchases of Japanese Government Bonds (Competitive Auction Method)."

(Reference) Expected Amount Outstanding of the Bank's JGB Holdings

Amount outstanding of

the Bank's JGB holdings

Percent reduction from end-

June 2024

(Compared to before the

reduction)

End-March 2027 About 480 trillion yen About 17%

End-March 2028 About 430-440 trillion yen About 24-25%

End-March 2029 About 390-400 trillion yen About 31-32%

End-March 2030 About 350-370 trillion yen About 36-39%

Notes: 1. Figures are estimated assuming that the monthly purchase amount will be maintained

at about 2 trillion yen. Based on face value.

2. The composition of purchases by residual maturity, etc. is assumed to remain broadly

unchanged.