Tamura: Japan's 2 percent inflation target already met
Bank of Japan Policy Board Member Naoki Tamura stated his view that Japan's 2 percent price stability target has already been achieved. Speaking in Hyogo, Tamura also noted upside risks to prices and discussed the economic outlook.
Middle East tensions weigh on growth
Japan's economy has recovered moderately, though some weakness persists from the Middle East situation, according to the Bank of Japan.
Initial uncertainty from the April 2025 U.S. tariff policy led to GDP forecast revisions, but subsequent trade agreements reduced this impact.
Business sentiment remained favorable, with the Tankan DI staying solid.
However, increased Middle East tension in February 2026 prompted a downward revision for fiscal 2026 real GDP growth.
Rising crude oil prices are expected to depress corporate profits and household income.
From fiscal 2027, GDP growth is projected to rise moderately as adverse effects wane.
On prices, the year-on-year CPI (excluding fresh food) has recently been around 1.5 percent, partly due to government energy measures.
The BOJ revised its fiscal 2026 CPI forecast upward to 2.8 percent, expecting crude oil prices to push up energy and goods prices, with wage increases passed on.
Thereafter, CPI is expected to decline toward 2 percent.
The 2 percent target is met
Policy Board Member Tamura believes underlying CPI inflation has already reached the 2 percent price stability target, with risks skewed to the upside.
He bases this on three factors.
First, the 2026 annual spring labor-management wage negotiations (Rengo results) show solid wage increases, with base pay hikes of around 3.5 percent for firms, exceeding 2 percent.
Second, while headline CPI has been below 2 percent, Tamura notes that excluding institutional factors like government energy measures, the rate has consistently been above 2 percent.
Third, medium-to-long-term inflation expectations support his view; firms' 5-year outlook is 2.5 percent (March 2026 Tankan) and households' expectations are also around 2 percent.
Target hit, risks to the upside
Policy Board Member Tamura's assessment that the 2 percent target is already met represents a significant internal challenge to the BOJ's official view.
His detailed arguments, backed by robust wage data and rising inflation expectations, suggest a more immediate need for policy adjustment.
This divergence highlights potential future shifts in the BOJ's communication and policy path, especially if upside risks to prices materialize.