BOJ raises policy rate to 1.0 percent

The Bank of Japan identifies a significant risk of underlying CPI inflation deviating upward, potentially exceeding its 2 percent price stability target.

This concern is primarily driven by persistent inflationary pressure stemming from the rise in crude oil prices.

The central bank observes a relatively fast pace of price pass-through in business-to-business transactions, indicating that higher input costs are quickly reflected in wholesale prices.

This pass-through is expected to spread to an increase in consumer prices across a wide range of items.

Compounding these pressures is the continued rise in medium- to long-term inflation expectations, suggesting economic agents anticipate sustained price increases.

These factors underscore the Bank's decision to adjust its monetary policy stance, aiming to proactively address these inflationary trends and secure the sustainable achievement of its price stability objective.

Japan's economic activity aligns with the Bank of Japan's baseline scenario, showing resilience.

Downward pressure arises from higher crude oil prices due to the Middle East situation.

However, strong corporate profits and improved employment and income support the economy.

Government initiatives, including energy price relief for households, and progress in securing alternative raw material supplies, reduce the risk of a significant slowdown.

The economy is expected to continue moderate growth, though at a decelerated rate.