Not to be released until 8:50 a.m.
Japan Standard Time on Thursday,
May 7, 2026.
May 7, 2026
Bank of Japan
Minutes of the
Monetary Policy Meeting
on March 18 and 19, 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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1
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 Wednesday, March 18, 2026, from 2:00 p.m. to 3:53
p.m., and on Thursday, March 19, from 9:00 a.m. to 11:39 a.m.1
Policy Board Members Present
UEDA Kazuo, Chairman, Governor of the Bank of Japan
HIMINO Ryozo, Deputy Governor of the Bank of Japan
UCHIDA Shinichi, Deputy Governor of the Bank of Japan2
NOGUCHI Asahi
NAKAGAWA Junko
TAKATA Hajime
TAMURA Naoki
KOEDA Junko
MASU Kazuyuki
Government Representatives Present
MAEDA Tsutomu, Deputy Vice -Minister for Policy Planning and Coordination,
Ministry of Finance
KIUCHI Minoru, Minister of State for Economic and Fiscal Policy, Cabinet Office3
HAYASHI Sachihiro, Vice-Minister for Policy Coordination, Cabinet Office4
MIZUTA Yutaka, Deputy Director General for Economic and Fiscal Ma nagement,
Cabinet Office5
Reporting Staff
SHIMIZU Seiichi, Executive Director (Assistant Governor)
KAMIYAMA Kazushige, Executive Director
1 The minutes of this meeting were approved by the Policy Board at the Monetary Policy Meeting
held on April 27 and 28, 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 Present via conference call.
3 Present on March 19 from 9:45 a.m. to 11:39 a.m.
4 Present on March 18.
5 Present on March 19 from 9:00 a.m. to 9:44 a.m.
2
SUWAZONO Kenji, Executive Director
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, Head of Economic Research Division, 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
NISHINO Kousuke, Senior Economist, Monetary Affairs Department
FUKUSHIMA Shunsuke, Senior Economist, Monetary Affairs Department
3
I. Summary of Staff Reports on Economic and Financial Developments6
A. Market Operations in the Intermeeting Period
The Bank had been conducting money market operations in accordance with the
guideline for money market operations decided at the previous meeting on January 22 and 23,
2026.7 The uncollateralized overnight call rate had been in the range of 0.727 to 0.736
percent.
Meanwhile, the Bank had conducted Japanese government bond (JGB) purchases
of about 2.9 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) were more or less unchanged.
The Tokyo Stock Price Index (TOPIX) was more or less unchanged over the
intermeeting period; it had risen following the House of Representatives election, but had
subsequently declined, affected by the situation in the Middle East. Yields on 10 -year JGBs
were more or less unchanged, reflecting market attention to inflationary pressure and to
concerns over an economic downturn, both of which stemmed from the situation in the
Middle East. 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 both the U.S. dollar
and the euro over the intermeeting period, albeit with fluctuations.
C. Overseas Economic and Financial Developments
Overseas economies had grown moderately on the whole, although some weakness
had been seen in part, reflecting trade and other policies in each jurisdiction. The U.S.
economy maintained solid growth on the whole, although some weakness had been seen in
part. European economies had shown resilience, particularly in do mestic demand, although
6 Reports were made based on information available at the time of the meeting.
7 The guideline was as follows:
The Bank will encourage the uncollateralized overnight call rate to remain at around 0.75
percent.
4
weakness remained in part. The Chinese economy had decelerated, mainly due to the impact
of tariff increases and the gradually diminishing effects of government policies, and as
adjustment pressure continued in the real estate and other markets. Emerging and commodity-
exporting economies other than China had improved moderately on the whole.
As for the outlook, with the expectation that the situation in the Middle East would
gradually moderate, overseas economies were projected to re turn to a growth path, partly
supported by global AI -related demand, even as downward pressure stemming from the
impact of trade and other policies in each jurisdiction was expected to remain. 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 global financial markets and the global economy;
in addition, there remained high uncertainties over, for example, the impact of trade policy in
each jurisdiction and over developments in global AI-related demand.
With respect to overseas financial markets, since the turn of March 2026, market
sentiment had deteriorated significantly in the wake of increased tension over the situation in
the Middle East. U.S. stock prices had declined, partly due to concerns over developments in
AI-related sectors and to risk-off moves among market participants reflecting the situation in
the Middle East. European stock prices had declined, affected by the situation in the Middle
East. U .S. long -term interest rates had fallen due to weak economic indicators, but had
subsequently risen reflecting market attention to inflationary pressure in the wake of the
situation in the Middle East. European long -term interest rates had moved in line wi th
developments in U.S. long-term interest rates. Meanwhile, currencies in emerging economies
had depreciated amid the U.S. dollar's appreciation due to the increased tension over the
situation in the Middle East. Crude oil prices had risen significantly, mainly against the
background of the de facto closure of the Strait of Hormuz.
D. Economic and Financial Developments in Japan
1. Economic developments
Japan's economy had recovered moderately, although some weakness had been seen
in part. Regarding the outlook, the economy was likely to continue growing moderately, with
overseas economies returning to a growth path, and as a virtuous cycle from income to
spending gradually intensified, supported by factors such as the government's economic
measures and accommodative financial conditions, while the economy was projected to be
5
affected by trade and other policies in each jurisdiction. However, in the wake of the increased
tension over the situation in the Middle East, global financial and capital markets had been
volatile and crude oil prices had risen significantly; future developments warranted attention.
Exports continued to be more or less flat as a tren d. Regarding the outlook, they
were likely to remain more or less flat for a while. This was because, although solid global
AI-related demand was expected to push up exports, mainly of IT-related and capital goods,
the increased tension over the situation in the Middle East was projected to lead to a decline
in automobile exports to the Middle East and push down production and trade activity in
manufacturing through the emergence of bottlenecks on the supply side and through
heightened uncertainties.
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 it was likely to be pushed up by solid global
AI-related demand and resilient domestic demand that was partly supported by the
government's economic measures, industrial production was projected to be pushed down by
production adjustments in the basic materials industry and by heightened uncertainties, both
of which were due to the increased tension over the situation in the Middle East.
Corporate profits remained at high levels on the whole, although downward effects
due to tariffs had been seen in manufacturing. In this situation, business fixed investment had
been on a moderate increasing trend. With regard to the outlook, business fixed investment
was likely to continue on an increasing trend, supported by moves to clear order backlogs and
by labor-saving investment to address labor shortages; that said, downward pressure was
likely to be gradually exerted on business fixed investment from a deceleration in corporate
profits due to higher crude oil prices and from a rise in construction costs.
Private consumption had been resilient against the background of an improvement
in the employment and income situation, although it had been affected by price rises. The
consumption activity index (CAI; real, travel balance-adjusted) had been flat for the October-
December quarter of 2025, but had increased for January 2026 relative to that quarter, mainly
for nondurable goods, such as beverages and food. Based on anecdotal information from
firms, statistics published by industry organizations, and high -frequency indicators, private
consumption since Februar y seemed to have declined slightly from the previous month.
Consumer sentiment had seen a clear improvement recently, as the year -on-year rate of
6
change in real wages had turned positive and projected inflation had clearly declined, both of
which reflected (1) a decline in the rate of increase in food prices and (2) the government's
measures to reduce the household burden of higher energy prices. Regarding the outlook,
private consumption was expected to remain resilient for the time being, supported by a r ise
in employee income and by government measures to address rising prices, but downward
pressure stemming from higher energy prices was likely to intensify from spring 2026.
The employment and income situation had improved moderately. The year-on-year
rate of change in the number of employed persons had been at 0 percent, pushed down by a
decline in the number of self-employed persons. 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 risen
significantly recently, against the background of the inc reased tension over the situation in
the Middle East. Copper prices had also seen a clear increase. Meanwhile, market prices of
food had been on a moderate declining trend. The year-on-year rate of increase in the producer
price index (PPI) had been on a decelerating trend, mainly due to the past decline in crude oil
prices and the deceleration in the pace of increase in food prices, such as rice prices, and had
been at around 2 percent recently. The year-on-year rate of increase in the services producer
price index (SPPI, excluding international transportation) had been on a decelerating trend,
being at around 2.5 percent recently, primarily because the impact of the price hikes seen in
fiscal 2024 had dissipated, although the rate itself remained relativel y 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 fallen to around 2 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 temporarily decelerate to a level
below 2 percent in the short run, with the waning of the effects of the rise in food prices, such
as rice prices, and pushed down by a decline in energy prices reflecting the government's
measures to reduce the household burden of higher energy prices; thereafter, however, the
7
rate of increase was expected to come under upward pressure again, affected by the surge in
crude oil 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 moderately on the bac k 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 amount outstanding of bank lending had been at around 5
percent; that in the aggregate amount outstanding of CP and corporate bonds had been in the
range of 7.0 -7.5 per cent. 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 in the range
of 1.5-2.0 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
since the turn of March 2026, market sentiment had deteriorated significantly in the wake of
the increased tension over the situation in the Middle East. Some members expressed the
recognition that, with crude oil prices rising significantly, volatility in financial markets had
risen, as seen in, for example, the decline in stock prices in m ajor economies. One of these
members pointed out that the so-called flight to quality seemed to have been constrained even
with risk sentiment becoming cautious, and that this was partly because the formation of
government bond yields had been affected by factors such as growing global concerns over
rising inflation.
Members shared the recognition that overseas economies had grown moderately on
the whole, although some weakness had been seen in part, reflecting trade and other policies
in each jurisdiction. As for the outlook, they concurred that, with the expectation that the
8
situation in the Middle East would gradually moderate, overseas economies were projected
to return to a growth path, partly supported by global AI-related demand, even as downward
pressure stemming from the impact of trade and other policies in each jurisdiction was
expected to remain. A few members pointed out that future developments in overseas
economies depended on the extent to which possible negative shocks arising from the
situation in the Middle East would be offset by demand for IT-related goods, fiscal policy in
each jurisdiction, and other factors. These members then expressed the view that, in light of
the recent strength in global demand for IT-related goods and expansionary macroeconomic
policy in each jurisdiction, a significant slowdown in the global economy and resulting
downward deviation in prices was unlikely to occur, at least in the current baseline scenario.
Members agreed that the U.S. economy maintained solid growth on the whole,
although some weakness had been seen in part. A few members expressed the recognition
that the impact of tariffs, which had been a major concern associated with corporate activities
and prices, remained limited. Some members were of the view that the recent substantial
increase in AI-related investment had been the driving force of the U.S. economy, although
the expansion of the AI boom could cause uncertainty about the employment situation in the
United States and business conditions for the country's software-related firms competing with
AI-related firms. One member noted that, currently, there were no indicators showing
significant changes in the U.S. price situation and labor market conditions. The member then
stated that if the economy continued to see mixed conditions in this way, the process of very
moderate cuts in the U.S. policy interest rate could be expected to continue. Meanwhile,
regarding characteristics of AI -related investment in the United States, one member noted
that active use had been made of the private credit market, and that risks had been transferred
to a wide range of investors through, for example, the structuring of securitized products. The
member continued that, since it had been difficult to identify where the risks lay, financial
developments warranted careful monitoring.
Members shared the recognition that European economies had shown resilience,
particularly in domestic demand, although weakness remained in part.
Members shared the view that the Chinese economy had decelerated, mainly due to
the impact of tariff increases and the gradually diminishing effects of government policies,
and as adjustment pressure continued in the real estate and other markets.
9
Members shared the recognition that emerging and commodity -exporting
economies other than China had improved moderately on the whole.
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 view that Japan's economy
had recovered moderately, although some weakness had been seen in part. Many members
expressed the recognition that economic data for the past few months, which did not include
the effects of the increased tension over the situation in the Middle East, indicated that the
virtuous cycle from income to spending had been maintained in both the corporate and
household sectors. These members continued that the data wer e generally in line with the
Bank's outlook in the January 2026 Outlook for Economic Activity and Prices (Outlook
Report). One of these members added that the recent solidity in the domestic economy was
seen in, for example, figures for the October -December quarter of 2025 for private
consumption and business fixed investment in real GDP statistics and those for corporate
profits and business fixed investment in the Financial Statements Statistics of Corporations
by Industry. On the other hand, a different member pointed out that, while Japan's economy
remained resilient, economic downside effects stemming from the increased tension over the
situation in the Middle East -- such as rising gasoline prices -- had already started to emerge,
and that future developments would continue to warrant attention.
As for the outlook for economic activity, members concurred that Japan's economy
was likely to continue growing moderately, with overseas economies returning to a growth
path, and as the virtuous cycle from inco me to spending gradually intensified, supported by
factors such as the government's economic measures and accommodative financial conditions,
while the economy was projected to be affected by trade and other policies in each jurisdiction.
On this basis, they also shared the recognition that, in the wake of the increased tension over
the situation in the Middle East, global financial and capital markets had been volatile and
crude oil prices had risen significantly, and that future developments warranted att ention.
Many members expressed the recognition that the impact of the situation in the Middle East
on Japan's economy depended heavily on how long and in what form the situation as seen
currently would continue. These members continued that, as future deve lopments were
unclear, there was not enough information at present for the Bank to revise its baseline
scenario of the outlook. In relation to this, one member pointed out that the situation in the
10
Middle East and the associated rise in crude oil prices should be considered as a risk scenario,
and it was necessary to carefully examine their impact on markets and the economy. On this
basis, the member expressed the view that so far, excessive reactions had been contained in
Japan, partly due to expectations surrounding the government's policies, and that the degree
of the impact could vary depending on future developments. This member continued that
there was thus no need to revise the baseline scenario for economic activity and prices at this
point. Meanwhile, one member noted that Japan's potential growth rate in recent years had
been supported by solid total factor productivity (TFP). The member then expressed the
recognition that, looking ahead, the extent to which there remained room for an increase in
working hours and whether appropriate investment was made amid changing circumstances
would also be key issues.
Members shared the recognition that exports and industrial production continued to
be more or less flat as a trend. In relation to services exports, one member expressed the view
that inbound tourism demand remained favorable on the whole, on the back of the yen's
depreciation, and that the impact of the decline in the number of Chinese tourists remained
limited, despite previous concerns. With rega rd to the impact on exports of the increased
tension over the situation in the Middle East, one member pointed out that, although the share
of exports to the Middle East was not so large for both goods and services, Japan's exports
could be indirectly affe cted through trade with economies such as Asia and Europe. The
member then commented that, regarding IT-related exports, which had been mainly directed
toward the NIEs and ASEAN economies, the recent rise in memory prices had improved
Japan's terms of trad e, and close attention was warranted on whether this situation would
change.
Members shared the recognition that business fixed investment had been on a
moderate increasing trend, with corporate profits remaining at high levels on the whole,
despite being affected by tariff policies. One member expressed the view that Japanese firms
maintained their positive business fixed investment stance, aiming to address geopolitical
risks and explore new areas of growth, and that, regarding the outlook, they were also likely
to continue labor-saving investment and investment to facilitate digital transformation, with
tightening labor market conditions. One member expressed the recognition that business fixed
investment was expected to remain solid, considering factors such as the expansion in AI -
related demand, high levels of corporate profits, and the government's support for focused
11
investment in 17 strategic sectors. Meanwhile, regarding corporate profits, a few members
said that, while U.S. tariff policy had pushed down the profits of some automakers, the
simultaneous expansion of the AI boom had significantly pushed up the profits of
semiconductor-related firms. These members continued that, as a result of this and other
factors, listed firms' full-year financial results for fiscal 2025 were expected to reach record
high levels. A different member expressed the recognition that, as far as the Tankan (Short-
Term Economic Survey of Enterprises in Japan) data suggested, profits after tax for small and
medium-sized firms had seen a clear increase in many industries, compared with five years
ago, and it seemed that favorable business performance in recent years had spread throughout
the corporate sector, regardless of firm size.
Members concurred that private consumption h ad been resilient against the
background of the improvement in the employment and income situation, although it had
been affected by price rises. One member expressed the recognition that a recent significant
change was that private consumption, which had been pushed down by high prices, had
finally started to turn upward, as moves to raise food prices, including rice prices, had waned.
One member pointed out that, considering that it was the period before annual wage increases
took effect, private consumpt ion had shown solid developments, partly supported by
government subsidies for gasoline prices, electricity charges, and gas charges. On this basis,
the member noted that the government's income transfer measures were set to continue into
fiscal 2026, as exemplified by the expansion of free high school tuition and the introduction
of free elementary school lunches. This member continued that these measures were expected
to push up consumption through an increase in households' disposable income.
Members shared the view that the employment and income situation had improved
moderately. A few members pointed out that, partly due to government measures to address
rising prices, the rate of increase in the CPI had seen a clear decline, and that the rate of
change in real wages, which had been in negative territory for a long time, had recently turned
positive. Meanwhile, with regard to the annual spring labor-management wage negotiations,
most members expressed the view that many large firms had met in full or nea rly full the
demands of their labor unions, and it was highly likely that a wide range of firms would
continue to raise wages steadily in 2026. A few members said that, although large firms were
likely to raise wages steadily, it was necessary, considering the situation in the Middle East,
to continue to monitor developments toward the overall final outcome of labor-management
12
wage negotiations, including those at small and micro firms. One of these members added
that there was a strong tendency for busines s managers in Japan to give consideration to
moves by other firms in the same industry and keep in line with them when deciding on their
own wage-setting stance. The member continued that close attention was therefore warranted
on whether uncertainties surrounding the situation in the Middle East would affect the trend
of wage hikes among small and medium-sized firms. In relation to this, noting that there had
been reports from small and micro firms since 2025 that they were struggling with the need
to rais e wages as a defensive step, a different member expressed the view that, when
examining the wage growth rates of these firms, it was necessary to carefully analyze whether
such structural factors were affecting these rates or whether the uncertainties surrounding the
situation in the Middle East were affecting them.
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 fallen to around 2 percent due
to factors such as the effects of the government's measures to reduce the household burden of
higher energy prices. In addition, members concurred that inflation expectations had risen
moderately. A few members expressed the recognition that, as the rise in food prices,
including rice prices, had started to subside recently, the Bank's outlook to date that the CPI
inflation rate would temporarily decelerate due to cost-push factors subsiding was becoming
a reality. One member noted that, while rice prices had started to decline reflecting the supply
and demand conditions for rice in the distribution process, price levels remained relatively
high. The member then expressed the view that this was one example of prices being less
likely to return to pre -surge levels once benchmark and market prices were formed. On this
basis, the member said that expectations of higher food prices among consumers as such
might have been affecting underlying inflation, and that close attention was warranted on the
spillovers from these price trends to prices of items other than food. One member stated that
the rate of increase in the price of processed food that does not use rice as an ingredient
remained elevated in the range of 5.0-6.0 percent. The member then noted that there had been
an increasing number of reports pointing out that the recent rise in food prices stemmed from
increased personnel expenses and distribution costs, rather than high raw material costs such
as international commodity prices and rice prices. This member continued that, however, the
13
rise in food prices was notable even compared with the rates of increase in personnel expenses
and distribution costs. A different member expressed the view that the year-on-year rate of
increase in the CPI for Tokyo's 23 wards for February 2026 had decelerated, as projected, due
to the effects of government policies, such as the abolition of the provisional gasoline tax rate,
and to the reactionary decline following the significant price rises in 2025, mainly of food.
The member continued that looking at the CPI by item, however, prices of services, s uch as
dining-out, hotel charges, and cram school fees, continued to reflect increases in personnel
expenses.
With regard to the outlook for prices, most members shared the recognition that the
year-on-year rate of increase in the CPI (all items less fresh food) was likely to temporarily
decelerate to a level below 2 percent, with the waning of the effects of the rise in food prices,
such as rice prices, and partly due to the effects of government measures to address rising
prices. These members continued that the rate of increase was then expected to come under
upward pressure, affected by the recent rise in crude oil prices. In addition, members shared
the view that, meanwhile, the mechanism in which wages and prices rise moderately in
interaction with each other was likely to be maintained, and, thereafter, it was projected that
a sense of labor shortage would grow as the economy continued to improve 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 and, in the
second half of the projection period of the January 2026 Outlook Report, be at a level that
was generally consistent with the price stability target. Members concurred th at attention
should also be paid to the impact of the rise in crude oil prices on the outlook for underlying
CPI inflation. One member pointed out that "beginning -of-the-period price hikes" by firms
would serve as an indicator for assessing whether underlying inflation would rise moderately.
The member then commented that developments in services prices in particular warranted
attention, given their relationship with wages. One member noted that the rate of increase in
the price of goods excluding food and energy and of services had been at around 1.5 percent,
remaining stable below 2 percent. On this basis, the member expressed the recognition that
underlying inflation appeared still to be below 2 percent, and this was not a situation where a
sharp increase in inflation should be of concern, assuming that the rise in food prices would
subside. A different member pointed out that underlying inflation had not been sufficiently
anchored at 2 percent yet. The member then expressed the view that, while attention had so
14
far been paid mainly to downside risks, there was also the possibility that underlying inflation
would exceed 2 percent, depending on the future course of the situation in the Middle East.
In addition, one member expressed the recognition that , if it could be confirmed that wage
hikes in the annual spring labor -management wage negotiations were at a level in line with
the price stability target for the third consecutive year, it could be judged as early as April
2026 that the underlying trend in prices had reached 2 percent. The member then said that an
examination of factors such as firms' and households' inflation expectations and firms' price-
setting behavior was required, using sources such as the March 2026 Tankan, the March 2026
Opinion Survey on the General Public's Views and Behavior, and anecdotal information from
firms. Meanwhile, 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, given that, for example, wage increases had been anchored and inflation
expectations had risen.
Members agreed that risks to economic activity and prices included the future course
of the situation in the Middle East as well as developments in crude oil prices, developments
in overseas economic activity and prices under the impact of trade and other policies in each
jurisdiction, wage- and price-setting behavior of firms, and developments in financial and
foreign exchange markets, and that it was necessary to pay due attention to the impact of
these risks on Japan's economic activity and prices.
On this basis, members discussed the possible impact of the situation in the Middle
East on Japan's economic activity and prices. With regard to the impact on economic activity,
they shared the recognition that the rise in crude oil prices -- especially the surge in Dubai
crude oil prices -- was likely to push down Japan's economy, which relied heavily on Middle
Eastern crude oil. A few of these members added that attention needed to be paid to the impact
of the increased tension over the situation in the Middle East on Japan's economy through a
deterioration in the terms of trade, as well as the resultant decline in corporate profits, more
cautious sentiment, and other factors. One member pointed out that, comparing the two
phases when commodity prices had risen significantly -- today and around 2022, when the
rise was due to Russia's invasion of Ukraine -- the situation was different in that, for example,
the economy around 2022 had been in a recovery phase from the COVID-19 pandemic with
various benefit payments and pent -up demand remaining, whereas recently, real wa ges
continued to decline and households' propensity to consume had increased considerably. The
15
member then expressed the view that, although the current shock did not seem to carry a high
risk of causing a deterioration in the economy, it warranted more attention than the shock in
2022. A few members noted that the extent to which the surge in crude oil prices and the rise
in inflation would push down the economy depended heavily on the degree and persistence
of the rise in crude oil prices. In relation to this, one member said that it was necessary to
keep in mind the possibility that it might take some time before safe passage through the
Strait of Hormuz was sufficiently secured and crude oil prices returned to pre -surge levels,
even if the conflict in th e Middle East was soon resolved. A few members pointed out that,
should the de facto closure of the Strait of Hormuz be prolonged, there was a risk that
downward pressure could be exerted on firms' production activity through the impact on
supply chains.
With regard to the impact of the situation in the Middle East on prices in Japan,
members concurred that, while energy and other prices could be pushed up in the short run,
underlying inflation could be pushed either upward or downward. As for the short -term
impact, one member said that there was concern that energy prices, which had been stable
recently, might rise, leading to an increase in headline CPI once again. One member pointed
out that, since a significant portion of liquefied natural gas (LNG) impo rted to Japan was
contracted at prices linked to crude oil prices in the Middle East, the surge in crude oil prices
in the Middle East would lead to an increase in prices, not only for gasoline and plastics but
also for a wide range of items, including ele ctricity and gas. Regarding the impact on
underlying inflation, many members expressed the recognition that, if downward pressure
was exerted on economic activity and the output gap deteriorated, this could push down
underlying inflation. These members continued that, on the other hand, if the rise in crude oil
prices led to an increase in firms' and households' medium- to long-term inflation expectations,
this would push up underlying inflation. Many members expressed the recognition that, since
firms' wage- and price-setting behavior had become more active over the past few years, the
rise in crude oil prices in the current phase was more likely to spill over to prices of various
other goods and services, and that these developments were more likely to lead to pushing up
underlying inflation through a rise in inflation expectations. One of these members pointed
out that there was concern that the surge in crude oil prices and the depreciation of the yen
would push up inflation significantly for an extended period, given factors such as inflation
expectations having risen to around 2 percent, firms' active price-setting behavior, and supply
16
shortages. One member added factors such as the following as reasons for the possibility that
underlying inflation could see an upward deviation: the fact that the output gap and labor
market conditions had tightened compared with 2022, and the possibility that people in Japan
might not regard the current inflation as merely temporary because the current shock was the
third one following those triggered by the invasion of Ukraine and the surge in rice prices. A
different member expressed the view that, even during a phase when actual prices rose with
an increase in crude oil prices, as seen today, inflation inertia was likely to remain, due to the
government's measures to support passing on price and wage increases, and this was likely to
raise inflation expectations and bring about inflation caused by second -round effects.
Meanwhile, another member noted that, should the ten sion over the situation in the Middle
East be prolonged, the direct impact on Japan's economic activity and prices was likely to be
far greater than that stemming from the surge in rice prices , but it was difficult to assess at
this point whether the direct impact would be greater than that arising from the rise in import
prices in 2022. The member then expressed the view that, compared with 2022, however,
greater attention was warranted on the spillovers and second-round effects of shocks on both
prices and growth. In addition, one member expressed the recognition that, having learned
from the criticism for "looking through" the rise in inflation in 2022, expectations for policy
interest rate hikes had been emerging recently in Europe and other countries, l eading to the
situation where downward pressure on the yen was likely to emerge.
B. Financial Developments
Members agreed that financial conditions in Japan had been accommodative. A few
members pointed out that real interest rates in the short - to medium-term zone, which affect
economic activity to a significant degree, remained clearly negative since the previous
meeting, while nominal interest rates were more or less unchanged. One member expressed
the view that bank lending had been solid due, for exam ple, to the recovery in economic
activity and to more active mergers and acquisitions of firms, and that one of the factors
behind these developments was low real interest rates. The member then expressed the
recognition that firms' return on assets (ROA) had significantly exceeded lending rates, and
profit expectations in asset markets, particularly the real estate market, had been high. This
member continued that financial conditions therefore remained accommodative, including in
the area of housing loans to households.
17
III. Summary of Discussions on Monetary Policy
Based on the above assessment of economic and financial developments, members
discussed monetary policy.
With respect to the guideline for money market operations for the intermeeting
period, most members shared the view that it was appropriate for the Bank to maintain the
guideline that it would encourage the uncollateralized overnight call rate to remain at around
0.75 percent. Some members expressed the recognition that, although the domestic economy
had been solid recently, there was concern, due to the impact of the increased tension over
the situation in the Middle East, about a resurgence of inflation stemming from the rise in
crude oil prices. These members continued that it was first necessary to assess developments,
including the future course of the situation in the Middle East. A few members expressed the
view that, given that uncertainties surrounding the situation in the Middle East had heightened
recently and market sentiment had deteriorated significantly, it was appropriate for the Bank
to maintain the current policy interest rate at this meeting. One member noted that the
reopening of the Strait of Hormuz was likely to take some time even if the conflict was
resolved in a short pe riod of time, and there were not a few concerns over an economic
slowdown. The member continued that, given these factors, it was appropriate that the Bank
not raise the policy interest rate at this point. On the other hand, one member expressed the
view that it was desirable for the Bank to raise the policy interest rate to around 1.0 percent
at this meeting, considering that the price stability target had been more or less achieved and
that risks to prices in Japan were skewed to the upside due to the sec ond-round effects of
price rises stemming from overseas developments. On this basis, the member pointed out that,
while expectations had been increasing for policy interest rate hikes by overseas central banks,
Japan's real policy interest rate was at the lowest level globally. This member then said that,
since foreign exchange market participants pay attention to real interest rate differentials
between Japan and abroad, it was necessary for the Bank to adjust the significantly negative
real policy interest rate relatively soon.
Members also discussed the impact of the policy interest rate hikes conducted so far
by the Bank. Some members expressed the recognition that, while interest rates such as short-
term prime rates had been increased incrementally in l ine with the policy interest rate hikes
conducted so far, accommodative financial conditions had been maintained, as seen, for
example, in the fact that firms' demand for funds continued to increase moderately and that
18
financial institutions' lending attitudes and firms' financial positions had stayed at favorable
levels on the whole. One of these members expressed the view that, even with regard to the
impact of the rate hikes on domestic investment, there had been few cases where the rise in
interest rate s was the reason for firms to withdraw investment, and that, in many cases,
withdrawal had been caused by labor shortages and increased material prices. A few members
expressed the recognition that the recent bankruptcies of firms had been mainly caused by
long-standing lackluster business performance and labor shortages, and it had rarely been the
case that the direct cause of bankruptcies was the rise in interest rates. One member pointed
out that, according to anecdotal information from firms, there were no signs that the impact
of the Bank's policy interest rate hikes to 0.75 percent had significantly reduced the degree of
monetary accommodation and led economic stimulus effects to weaken. A different member
expressed the recognition that, as for househo lds, the impact of the rise in interest rates had
hardly been observed, as developments in demand for housing loans had seen no significant
change and price rises were the main reason for the deterioration in the diffusion index (DI)
for household circumst ances in the Opinion Survey on the General Public's Views and
Behavior.
As for the future conduct of monetary policy , members concurred that, given that
real interest rates were at significantly low levels, if its outlook for economic activity and
prices was realized, it was appropriate that the Bank, in accordance with improvement in
economic activity and prices, continue to raise the policy interest rate and adjust the degree
of monetary accommodation. On this basis, members shared the view that, with the price
stability target of 2 percent, the Bank would conduct monetary policy as appropriate, in
response to developments in economic activity and prices as well as financial conditions,
from the perspective of sustainable and stable achievement of the targ et. With regard to the
timing for raising the policy interest rate in the future, many members expressed the
recognition that it was desirable for the Bank to continue with the following: making
decisions as appropriate at each Monetary Policy Meeting, while assessing (1) the likelihood
of realizing the outlook for economic activity and prices as well as underlying inflation, and
(2) the risks to the outlook. One of these members noted that the timing for raising the policy
interest rate would be determined by assessing factors such as developments in wages, prices,
and financial conditions, in addition to the impact of the situation in the Middle East. The
member then expressed the view that, specifically, from the next Monetary Policy Meeting
19
onwards, it w ould be appropriate to assess in detail whether financial conditions remained
accommodative after the last rate hike, while examining, for example, the extent to which
wage increases and "beginning -of-the-period price hikes" were widespread. One member
expressed the recognition that the situation in the Middle East could result in upward pressure
on prices and downward pressure on the economy. The member continued that, however,
under current financial conditions, the uptrend in prices was likely to be main tained, and,
moreover, given that, for example, moves to raise wages continued amid labor shortages and
firms' appetite for investment had been strong, the Bank would need to consider adjusting the
degree of monetary accommodation without long intervals between adjustments. A different
member expressed the view that it was necessary to avoid a situation where underlying
inflation continued to rise above 2 percent, and that, if there were no signs of a significant
deterioration in the economic environment or in the wage -setting stance of small and
medium-sized firms, the Bank would need to raise the policy interest rate without hesitation.
Another member pointed out that, with the policy interest rate still far away from the neutral
interest rate, falling behind the curve would compel the Bank to pursue rapid and significant
monetary tightening, which would cause a major shock to Japan's economy. The member then
stated that a policy rate hike, including the size of the hike, needed to be considered, taking
into account factors such as the course of the situation in the Middle East, the Tankan, reports
at the meeting of the general managers of the Bank's branches, and anecdotal information
from firms.
Members also discussed the stance on monetary policy conduct given the situation
in the Middle East . Many members expressed the recognition that, if supply shocks due to
the increased tension over the situation in the Middle East were temporary, the basic response
for the Bank would be to "look through" their impact. These members continued that, on the
other hand, if these shocks became prolonged and gave rise to concerns over the second -
round effects on general prices, it would be necessary for the Bank to respond after examining
the impact on inflation exp ectations and underlying inflation. One of these members
expressed the view that the cost -push pressure stemming from high crude oil prices could
bring about economic stagnation accompanied by price rises; in other words, 1970s -type
stagflation. The member continued that, when inflation was temporary, the basic response for
the Bank would be to wait until the cost-push factor dissipated, without taking hasty actions.
In relation to this, regarding responses taken following Russia's invasion of Ukraine, many
20
members expressed the recognition that in Europe and the United States, the decision to "look
through" the rise in inflation at that time, judging that it was temporary, was said to have
caused the subsequent surge in prices. These members continued that the lessons learned from
this experience lay behind the recently heightened expectations for policy interest rate hikes
in Europe and other countries. One of these members pointed out that, because policy interest
rates in Europe and the United States at t hat time were significantly below their respective
neutral interest rates, rapid rate hikes were inevitable once prices started to rise considerably.
The member continued that, however, since the policy interest rates in these economies were
currently more or less in their neutral range, substantial rate hikes, as eventually seen
following Russia's invasion of Ukraine, were less likely to become necessary. On this basis,
the member expressed the view that, because Japan's policy interest rate was currently below
its neutral range, particular attention should be paid to the upside risks to prices, given the
lessons learned from the experience in Europe and the United States. A different member
pointed out that monetary tightening could become necessary if cost-push pressure was likely
to intensify due to an excessive depreciation of the yen, or if the second-round effects became
more pronounced and caused wages to increase more than expected. The member continued
that, however, the risk of underlying inflation accelerating beyond 2 percent was low in Japan,
considering, for example, that it was still below 2 percent and a decline in corporate profits
resulting from a deterioration in the terms of trade could push down wages in 2027. Based on
these discussions, one member expressed the view that, if the tension over the situation in the
Middle East were to become prolonged, while having the main option of gradually proceeding
with rate hikes and adjusting the degree of monetary accommodation in line with previous
projections, it would also be appropriate to pay attention to whether it was necessary to
accelerate the pace of policy interest rate hikes beyond previous projections and shift toward
neutral or restrictive financial conditions in order to address upside risks to prices stemming
from the second-round effects. A different member noted that the pass -through of the yen's
depreciation had become more pronounced, and that firms' wage- and price-setting behavior
had become more active than in the past. The member continued that, against this background,
there was a risk that the Bank might unintentionally fall behind the curve, since the second -
round effects and the rise in underlying inflation, both of which stemmed from overseas
developments, were more likely to emerge relative to around 2022, when the deflationary
norm remained in place. On this basis, the member expressed the view that, while
21
uncertainties due to the rise in crude oil prices might exert downward pressure on economic
activity over time, the Bank should focus for the time being on addressing higher prices driven
by the second-round effects and the rise in inflation expectations. One member expressed the
recognition that maintaining price stability through monetary policy, and thus minimizing
downside risks to economic activity, were actions aligned with the principle that the Bank's
policy should be "aimed at achieving price stability, thereby contributing to the sound
development of the national economy."
Members also discussed the enhancement of the Bank's communication to the public
regarding the conduct of monetary policy. Some members expressed the recognition that,
because current consumer prices were likely to fluctuate in the short term due to factors such
as government measures to address rising prices and the impact of higher crude oil prices, the
Bank needed to further enhance its method of capturing underlying inflation, which is
important in conducting monetary policy. On this basis, these members expressed the view
that it was desirable for the Bank to provide more detailed explanations to the public, such as
by expanding the types of core CPI indicators and releasing CPI estimates that exclude the
effects of temporary institutional factors.
IV . Remarks by Government Representatives
The representative from the Cabinet Office made the following remarks.
(1) The Japanese economy was recovering at a moderate pace, while the effects of U.S. trade
policy remained.
(2) It was necessary to closely monitor with utmost vigilance the im pact of the situation in
the Middle East on the Japanese economy and developments in financial markets.
(3) Given the recent situation in the Middle East, the government had carried out emergency
measures to curb dramatic price fluctuations and had begun to release petroleum reserves,
and it would continue to do its utmost to ensure sound economic and fiscal management
in response to developments in economic activity and prices.
(4) The government expected the Bank to conduct monetary policy as appropriate toward
achieving the price stability target of 2 percent in a sustainable and stable manner, while
paying due attention to factors such as economic developments at home and abroad and
closely cooperating with the government in accordance with the spirit of the Ban k of
Japan Act and of the joint statement of the government and the Bank.
22
The representative from the Ministry of Finance made the following remarks.
(1) With regard to the outlook for the Japanese economy, there was concern over the point
that factors such as a surge in energy prices reflecting the situation in the Middle East
could pose downside risks to the economy. Moreover, it was necessary to closely monitor
developments in financial markets with utmost vigilance.
(2) 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, paying due attention to factors such as economic
developments at home and abroad, in cluding the impact of the situation in the Middle
East on the Japanese economy, and communicating effectively with the market.
V . Votes
A. Vote on the Guideline for Money Market Operations
Based on the above discussions, to reflect the majority view of th e members, the
chairman formulated the following proposal on the guideline for money market operations.
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 0.75 percent.
Takata Hajime, however, considered that the price stability target had been more or
less achieved and that risks to prices in Japan were sk ewed to the upside due to the second -
round effects of price rises stemming from overseas developments. On this basis, he
formulated the following proposal.
Takata Hajime'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.
23
Takata Hajime's policy proposal on the guideline for money market operations was
defeated by a majority vote.
V otes for the proposal: TAKATA Hajime.
V otes against the proposal: UEDA Kazuo, HIMINO Ryozo, UCHIDA Shinichi,
NOGUCHI Asahi, NAKAGAWA Junko, TAMURA Naoki, KOEDA Junko, and
MASU Kazuyuki.
The chairman's policy proposal on the guideline for money market operations was
decided by a majority vote.
V otes for the proposal: UEDA Kazuo, HIMINO Ryozo, UCHIDA Shinichi,
NOGUCHI Asahi, NAKAGAWA Junko, TAMURA Naoki, KOEDA Junko, and
MASU Kazuyuki.
V otes against the proposal: TAKATA Hajime.
B. Discussion on the Statement on Monetary Policy
On the basis of the above discussions, members discussed the Statement on
Monetary Policy. Takata Hajime expressed opposition to 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 expressed opposition to the description regarding the outlook for underlying CPI
inflation, considering that underlying CPI inflation was likely to be at a level that was
generally consistent with the price stability target from the beginning of fiscal 2026.
Based on this discussion, the chairman formulated the Statement on Monetary
Policy, which included a note explaining that Takata Hajime and Tamura Naoki had each
opposed a different part of the text, and put it to a vote. The Policy Board decided the text by
a unanimous vote. It was confirmed that the statement would be released immediat ely after
the meeting (see Attachment).
24
VI. Approval of the Minutes of the Monetary Policy Meeting
The Policy Board approved unanimously the minutes of the Monetary Policy
Meeting of January 22 and 23, 2026, for release on March 25.
25
Attachment
March 19, 202 6
Bank of Japan
Statement on Monetary Policy
1. At the Monetary Policy Meeting held today, the Policy Board of the Bank of Japan decided, by
an 8 -1 majority vote, to set the following guideline for money market operations for the
intermeeting period: [Note 1]
The Bank will encourage the uncollateralized overnight call rate to remain at around 0. 75
percent.
2. Japan's economy has recovered moderately, although some weakness has b een seen in part.
Overseas economies have grown moderately on the whole, although some weakness has been
seen in part, reflecting trade and other policies in each jurisdiction. Exports and industrial
production have continued to be more or less flat as a t rend. Corporate profits have remained
at high levels on the whole, although downward effects due to tariffs have been seen in
manufacturing. In this situation, business fixed investment has been on a moderate increasing
trend. Private consumption has been resilient against the background of an improvement in the
employment and income situation, although it has been affected by price rises. On the other
hand, housing investment has been on a declining trend. Meanwhile, public investment has
continued to be more or less flat. 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 fallen to around 2 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.
Japan's economy is likely to continue growing moderately, with overseas economies returning
to a growth path, and as a virtuous cycle from income to spending gradually intensifies,
supported by factors such as the government's economic measures and accommodative
financial conditions, while the economy is projected to be affected by trade and other policies
in each jurisdiction. However, in the wake of increased tension over the situation in the Middle
East, global financial and capital markets have been volatile and crude oil prices have risen
significantly; future developments warrant attention. The year -on-year rate of increase in the
26
CPI (all items less fresh food) is likely to tempora rily decelerate to a level below 2 percent,
with the waning of the effects of the rise in food prices, such as rice prices, and partly due to
the effects of government measures to address rising prices . The rate of increase is then
expected to come under u pward pressure , affected by the recent rise in crude oil prices.
Meanwhile, the mechanism in which wages and prices rise moderately in interaction with each
other is likely to be maintained. Thereafter, it is projected that a sense of labor shortage will
grow as the economy continues to improve and that medium - to long -term inflation
expectations will rise. In this situation, underlying CPI inflation is expected to increase
gradually and, in the second half of the projection period of the January 2026 Outlook for
Economic Activity and Prices (Outlook Report), be at a level that is generally consistent with
the price stability target. [Note 2] Attention should also be paid to the impact of the rise in crude oil
prices on the outlook for underlying CPI inflation.
Risks to the outlook include the future course of the situation in the Middle East as well as
developments in crude oil prices, developments in overseas economic activity and prices under
the impact of trade and other policies in each jurisdiction, wage- and price-setting behavior of
firms, and developments in financial and foreign exchange markets, and it is necessary to pay
due attention to the impact of these risks on Japan's economic activity and prices.
3. As for the conduct of monetary policy, given that real interest rates are at significantly low
levels, if the outlook for economic activity and prices presented in the January Outlook Report
will be realized, the Bank, in accordance with improvement in economic activity and prices,
will continue to raise the policy interest rate and adjust the degree of monetary accommodation.
With the price stability target of 2 percent, it will conduct monetary policy as appropriate, in
response to developments in economic activity and prices as well as financial conditions, from
the perspective of sustainable and stable achievement of the target.
[Note 1] V oting for the action: UEDA Kazuo, HIMINO Ryozo, UCHIDA Shinichi, NOGUCHI Asahi,
NAKAGAW A Junko, TAMURA Naoki, KOEDA Junko, and MASU Kazuyuki. V oting against the action:
TAKA TA Hajime. Takata Hajime considered that the price stability target had been more or less achieved
and that risks to prices in Japan were skewed to the upside due to the second-round effects of price rises
stemming from overseas developments. He proposed that the Bank set the guideline for money market
operations as follows: the Bank would encourage the uncollateralized overnight call rate to remain at
around 1.0 percent. The proposal was defeated by a majority vote.
[Note 2] 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 underlying CPI
inflation, considering that underlying CPI inflation wa s likely to be at a level that was generally
consistent with the price stability target from the beginning of fiscal 2026.