Japan Kerninflation

The Bank of Japan (BoJ) must carefully assess the impact of rising food prices on underlying inflation, which is now approaching the 2% target, Governor Kazuo Ueda stated at a BoJ-hosted event on Tuesday. “We are facing another round of supply shocks in the form of food price increases,” he noted, adding that these effects are expected to wane. Ueda reaffirmed the central bank’s readiness to raise interest rates if data strengthens confidence in the economy’s recovery. Despite recent rate hikes and the end of a decade-long stimulus program, global uncertainties—such as higher U.S. tariffs—have compelled the BoJ to revise its growth forecasts downward. Policymakers still anticipate inflation will gradually reach 2% by FY 2027. However, Ueda cautioned that both upside and downside risks remain, particularly for FY 2025 and 2026. He stressed that the BoJ would adjust its policy based on incoming data, maintaining a flexible approach “without any preconceptions.”