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Not to be released until 8:50 a.m.
Japan Standard Time on Tuesday,
May 12, 2026.
May 12, 2026
Bank of Japan
Summary of Opinions at the Monetary Policy Meeting1,2
on April 27 and 28, 2026
I. Opinions on Economic and Financial Developments
Economic Developments
⚫ Japan's economy has recovered moderately, although some weakness has been seen in part ,
partly due to the impact of the situation in the Middle East . In fiscal 2026, Japan's economic
growth is likely to decelerate due to factors such as a deterioration in the terms of trade
reflecting the rise in crude oil prices . However, the economy is expected to continue growing
moderately, since it is likely to be underpinned by factors such as the government's vario us
measures and accommodative financial conditions. From fiscal 2027 onward, Japan's economic
growth rate is expected to rise moderately, since it is projected that the adverse effects of high
crude oil prices will wane.
⚫ The increased burden caused by a deterioration in the terms of trade has been shared between
firms, households, and the government, through, for example, the pass -through of cost
increases to selling prices by firms and the provision of gasoline subsidies by the government.
With high levels of profits having been accumulated in the corporate sector and expectations
for wage hikes as a result of the annual spring labor -management wage negotiations, Japan's
economy appears to be reasonably resilient to downward pressure.
⚫ Regarding the deterioration in the terms of trade, while import prices in the petroleum and
chemical industries have risen significantly due to the impact of the situation in the Middle
East, yen-based export prices in the IT industry have risen on the back of strong global demand.
1 English translation prepared by the Bank's staff based on the Japanese original.
2 "Summary of Opinions at the Monetary Policy Meeting" is made through the following process: (1) each
Policy Board member and government representative makes a summary of op inions that she/he presented
at the Monetary Policy Meeting (MPM) under a certain word limit and submits this to the Governor of the
Bank of Japan, who serves as the chairman of the MPM, and (2) the chairman edits those opinions as his
responsibility.
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As seen from such developments, the situation differs between industries, and it is therefore
necessary to examine the situation throughout Japan.
⚫ The impact of the situation in the Middle East on Japan's economy depends not only on the
extent and duration of supply -side constraints for crude oil and products derived from crude
oil, but also to a considerable extent on the effects on the supply of other commodities as
damage spreads across the Middle East.
⚫ There is a possibility that quantitative constraints on petrochemical products will emerge, and
while it is difficult to project the extent to which these constraints might push down Japan's
economy, they could even affect Japan's core industries.
Prices
⚫ Underlying CPI inflation is likely to increase gradually, as the mechanism in which wages and
prices rise moderately in interaction with each other is expected to be maintained. Underlying
CPI inflation is expected to come to a level that is generally cons istent with the price stability
target between the second half of fiscal 2026 and fiscal 2027 and remain at around that level
thereafter.
⚫ The impact of the situation in the Middle East on the underlying trend in prices will not be
significant if crude oil prices return swiftly to previous levels. However, if the pace of recovery
in the supply of crude oil and other commodities is moderate, this could either push up or push
down the underlying trend in prices. If the situation becomes prolonged, risks to und erlying
inflation will be skewed to the upside, but if it is accompanied by significant disruptions in
supply chains, downward pressure is likely to be greater than upward pressure.
⚫ Given that inflation expectations in Japan tend to be formed in an adaptiv e manner, the price
rises in the current fiscal year, which reflect the situation in the Middle East, could lead to
underlying CPI inflation deviating upward from the baseline scenario.
⚫ A further rise in domestic distribution costs due to the surge in fuel costs cannot be avoided,
and this could bring forward the timing for underlying CPI inflation to reach 2 percent.
⚫ It can be considered from the experience of the past oil crises that, unlike during the 1979 oil
crisis, when the surge in inflation was contained, the current financial and fiscal conditions and
developments in the pass -through of price and wage increases appear to be more prone to
inducing second-round effects stemming from the rise in crude oil prices.
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⚫ As it will take time for the Strait of Hormuz to become commercially navigable, the scenario
of crude oil prices remaining elevated for a while should also be considered.
⚫ Depending on the future course of the situation in the Middle East, crude oil prices could
remain elevated for longer than expected. If this is the case, it is possible that corporate profits
and households' real income will be significantly lower than expected, which could weaken the
mechanism in which wages and prices rise moderately in interaction with each other. That said,
in practice, the rise in crude oil prices is expected to skew risks to prices to the upside by
pushing up not only energy prices but also prices of a wide range of items.
⚫ Even if high crude oil prices exerted downward pressure on Japan's economy, it would take
time for the pressure to materialize. Given that the economy has also been supported by the
overseas macroeconomic environment, it is highly likely that, in terms of timing, prices and
inflation expectations would rise first.
⚫ With the outlook for pri ces being revised significantly upward, uncertainty regarding the
situation in the Middle East remains high, and all scenarios point to further upside risks to
prices. Moreover, supply -side constraints, if they materialize, will exert extremely strong
upward pressure on prices.
⚫ For many years, all available policy measures from both monetary and fiscal sides have been
mobilized to overcome deflation. Against this backdrop, the government's various measures
have become established, and inertia in wage increases and in the pass-through of cost increases
to selling prices is in effect, giving rise to the risk of higher inflation due to the rise in crude oil
prices.
II. Opinions on Monetary Policy
⚫ Given that underlying CPI inflation has been approaching 2 perce nt and real interest rates are
at significantly low levels, it is 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.
⚫ While Japan's economic growth rate is expected to be at around the same level as the potential
growth rate for the time being, the Bank may need to address the risk of prices deviating upward.
Considering such circumstances, with regar d to the guideline for the conduct of monetary
policy, it is desirable to revise the previous wording, "in accordance with improvement in
economic activity and prices."
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⚫ It is difficult to foresee the impact of the situation in the Middle East, and the Bank needs to
adopt a wait-and-see approach at this meeting.
⚫ Given that inflation expectations in Japan are considered to be adaptive to some degree, the
Bank should maintain the current policy interest rate at this meeting, with the year-on-year rate
of increase in the CPI (all items less fresh food) for March remaining below 2 percent due in
part to the waning of the past rise in food prices.
⚫ At this juncture, a policy interest rate hike that prioritizes the containment of inflation is highly
likely to have adverse effects on economic developments, including employment and
production. On the other hand, the Bank is also not in a situation where a policy interest rate
cut is possible. Given that the future course of the situation in the Middle East is unclear, it is
most appropriate for the Bank to maintain its current monetary policy.
⚫ The situation in the Middle East remains unclear, and the current circumstances do not suggest
a pressing need to quickly raise the policy interest rate. However, given that the impact on
Japan's economy will become apparent to some degree, it is quite possible that the Bank will
raise the policy interest rate from the next MPM onward, eve n if the future course of the
situation in the Middle East remains unclear.
⚫ It is unlikely at present that a strong wage-price spiral will emerge in domestic industries, and
given the current level of underlying inflation, there is no need to take hasty action at this point.
However, barring evident signs of an economic slowdown, the Bank should raise the policy
interest rate soon.
⚫ Although it seems unlikely that the impact of the situation in the Middle East will be limited
and ease in the short term, mark et sentiment as observed in stock prices has remained solid
despite the rise in crude oil prices. Firms' price-setting behavior in response to rising prices has
become more active, and risks to prices are skewed to the upside. It is appropriate for the Bank
to adjust the degree of monetary accommodation in line with its mandate of achieving price
stability from the perspective of safeguarding people's liveliho ods and contributing to their
peace of mind.
⚫ Japan's real policy interest rate is by far at the lowest level globally, and it is necessary for the
Bank to continue to adjust the negative real interest rate in preparation for the second -round
effects of price rises.
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⚫ While downside risks to economic activity and upside risks to prices could both heighten, in
conducting monetary policy, it is necessary to pay due attention, in particular, to keep the risk
of inflation significantly deviating upward from materializing and thereby exerting an adverse
impact on the economy afterward.
⚫ Since the main risk factor for a downward deviation in economic activity is a rise in prices, the
Bank should make it a priority to carry out its mission as the "guardian of price stability" and
thereby contain a downward deviation of economic activity.
⚫ In a situation where the potential growth rate remains resilient and Japan's economy recovers
moderately, it is appropriate for the Bank to proceed further with the normalization of the policy
interest rate by raising the policy rate when the real interest rate declines reflecting price rises.
⚫ The policy interest rate is still some way from the neutral interest rate, and it will be necessary
for the Bank to continue to raise the poli cy interest rate at intervals of a few months.
Furthermore, in the case where upside risks to prices increase, it will be necessary to accelerate
the pace of rate hikes without hesitation.
⚫ If recovery in crude oil supply comes in sight, it will be appropriate for the Bank to return to
the previous pace of rate hikes. Meanwhile, if tension over the situation in the Middle East
becomes prolonged, there will be a need to raise the policy interest rate to the level of the
neutral interest rate at an earlier timing to prevent underlying inflation from deviating upward.
That said, if disruptions in supply chains become significant, it will be desirable for the Bank
to maintain accommodative financial conditions without raising the policy interest rate.
⚫ It is not desirable for the Bank to be perceived as always signaling a policy interest rate hike in
advance. It is necessary for the Bank to explore how best to communicate its policies.
III. Opinions from Government Representatives
Ministry of Finance
⚫ With regard to the situation in the Middle East, the government is making every effort to
minimize the impact on economic activity, with close cooperation between relevant Cabinet
members.
⚫ The government expects the Bank to conduct monetary policy as appropriat e 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
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developments at home and abroad, including the impact of the situation in the Middle East on
Japan's economy, and communicating effectively with the market.
Cabinet Office
⚫ Given the situation in the Middle East, the government has carried out emergency measures to
curb dramatic price fluctuations and has worked to ensure a st able supply and the smooth
distribution of crude oil and critical materials, and it will do its utmost to ensure sound
economic and fiscal management.
⚫ Toward achieving both strong economic growth and stable inflation, it is important that
monetary policy b e conducted as appropriate. The government expects the Bank to conduct
monetary policy as appropriate toward achieving the price stability target of 2 percent in a
sustainable and stable manner, while 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 Bank of Japan Act and of the joint statement of the government and the
Bank.