Bank of Japan likely to consider raising inflation forecast: sources

The central bank will update its quarterly outlook report at the end of its meeting on Jul 31

Published Mon, Jul 14, 2025 · 01:27 PM

Bank of Japan (BOJ) officials are likely to consider raising at least one of their inflation forecasts at a policy meeting later this month, after rice and food-related prices rose more than expected, according to sources familiar with the matter.

The sources said the central bank will probably weigh increasing its key price forecast from 2.2 per cent for this fiscal year; this comes after food inflation proved stronger than they had expected at the beginning of May, when the last quarterly outlook report was released. Higher oil prices provide another reason for considering an upward revision, the sources added.

The BOJ will update its quarterly outlook report at the end of its meeting on Jul 31. The bank is widely expected by BOJ watchers to keep its benchmark rate unchanged at 0.5 per cent at the meeting.

The price of rice has doubled over the year till May and has become a key political issue, while Middle East tensions have jolted the oil market.

Still, the BOJ sees little need to make any major changes to its big-picture outlook for the economy and inflation, according to the sources.

The bank will likely retain its view that Japan’s price trend will be consistent with its sustainable inflation goal in the second half of the BOJ’s three-year outlook period to March 2028, they said.

The officials see uncertainties remaining extremely high and believe they need to carefully monitor the impact of US President Donald Trump’s tariffs in incoming data to decide the timing of the next rate hike.

The BOJ will finalise its outlook by sifting through all the data and information available until the last minute, according to the sources.

In making the forecast, the BOJ will not be considering the impact of the across-the-board tariff of 25 per cent announced by Trump last week, as trade talks are still under way and that means the level is subject to change, they said. BLOOMBERG

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