The Bank of Japan released a report on July 31 saying that in the 2026 fiscal year, the growth rate of the Japanese economy will slow down due to factors such as oil prices. Real GDP is expected to grow by 0.6%, and is expected to grow by 0.8% for the next two years. Affected by wage transmission, oil prices, and the depreciation of the yen, the core CPI is expected to rise by 2.5% in the 2026 fiscal year, which will be significantly higher than 2% in the second half of the year, and the underlying inflation rate will reach the 2% target around the 2027 fiscal year. The Bank of Japan indicated that the risk of inflation is biased upward. Given the easing of financial conditions, it will continue to raise policy interest rates and adjust the degree of easing.

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