Rate opinions diverge on how quickly to reach neutral
Bank of Japan (BoJ) opinions favor further rate increases but differ on their pace as underlying inflation reaches around 2 percent. CPI inflation excluding fresh food is projected to exceed 3 percent toward the end of fiscal 2026.
Neutral rate divides the board
At the October 29-30, 2026 meeting, some opinions favored holding the policy rate to examine risks and cumulative tightening effects.
Others urged faster progress toward neutral, citing underlying inflation consistent with the 2 percent target and accommodative financial conditions.
One placed neutral considerably above 1 percent; another said the policy rate had entered its estimated neutral range.
Opinions also supported monitoring financial conditions for a few months after each increase or continuing gradually.
Recent CPI inflation of 2-3 percent raised overshooting concerns, alongside risks from delayed tightening effects.
Financial conditions were assessed through real rate gaps, corporate finance and bank lending, and asset prices.
Energy costs meet ETF sales
Higher energy and raw material costs were projected to slow fiscal 2026 growth, with improvement from fiscal 2027 as their effects fade.
AI demand supported activity, but consumption lacked momentum: the July-August Consumption Activity Index fell against April-June.
Opinions favored changing exchange-traded fund (ETF) sales, conducted smoothly since January 2026, as stock trading expanded.
The Ministry of Finance and Cabinet Office supported appropriate ETF decisions, government cooperation and sustainable achievement of 2 percent inflation.
Anchoring remains the test
Reaching 2 percent underlying inflation is not the same as securing it.
Opinions described Japan's inflation anchor as weaker than those in Europe and the United States, with oil-price second-round effects limited so far.
The 2027 spring wage negotiations therefore remain a test of wage-price durability.