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The Bank of Japan (BoJ) announced its interest rate decision after the monetary policy meeting. With the unanimous decision, the short-term interest rate was left unchanged at 0.25 percent. In addition, the Bank published the “Outlook Report for Economic Activity and Prices” for October 2024. In the report, it was stated that the Japanese economy is likely to continue to grow at a pace above the potential growth rate, while the annual rate of increase in the core Consumer Price Index (CPI) is expected to be about 2.5 percent in fiscal 2024 and then about 2 percent in fiscal 2025 and 2026.
‘High risk persists’
In terms of outlook risks, the report said that high uncertainties about Japan’s economic activity and prices persist, including developments in overseas economic activity and prices, developments in commodity prices, and the wage and price-setting behavior of domestic firms.
The report noted that with the recent shift in firms’ behavior towards raising wages and prices, exchange rate developments are more likely to affect prices than in the past, and in terms of the balance of risks, risks to economic activity are generally balanced and risks to prices are on the upside for fiscal 2025.
