Main Opinions at the Monetary Policy Meeting, July 30–31, 2026

This document compiles the main opinions expressed at the Monetary Policy Meeting held by the Bank of Japan on July 30 and 31, 2026. Each Policy Board member and government participant summarized their opinions and submitted them to the chair, who edited them item by item.

Regarding economic conditions, the situation in the Middle East was seen as exerting downward pressure, the expansion of AI-related demand as exerting upward pressure, and the weaker yen as working in both directions. The breadth of AI-related demand expanded more than expected, and private consumption was considered resilient, partly because of wealth effects accompanying rising stock prices.

Regarding prices, the mechanism of wages and prices rising while influencing each other was considered to remain in place, and underlying inflation was expected to rise gradually. At the same time, attention was being paid to upside risks arising from crude oil prices, foreign exchange rates, geopolitical risks, and AI-related demand.

It was pointed out that if upside risks to prices materialize, they could deliver a major blow to Japan's economy and people's livelihoods, followed by a double shock in which a rapid and substantial rate hike would become unavoidable.

To avoid underlying inflation rising above 2% and subsequently harming the economy, an opinion was expressed that the focus of monetary policy should shift from promoting price increases to avoiding further upside surprises.

In fiscal 2026, rising crude oil prices were expected to weigh on the economy, but it was projected to continue growing moderately, albeit at a slowing rate, supported by global AI-related demand and various government measures. From fiscal 2027 onward, the negative effects of high crude oil prices were expected to fade, allowing the growth rate to rise moderately.

In light of rising domestic logistics costs, packaging materials, and food trays, prices of final consumer goods were expected to accelerate their increase again toward the beginning of autumn. While crude oil prices and the benchmark price of naphtha had fallen from their April peaks, domestic corporate goods prices rose in response to higher import prices, whereas consumer prices remained below 2%, partly due to policy effects.

Financial conditions were assessed as remaining accommodative because short-term real interest rates were negative, financial institutions were willing to lend, and both the growth rate of bank lending and funding demand from companies and others were increasing. The time lag before the effects of a rate hike emerge was considered to be approximately one year to one and a half years.

Regarding policy management, one opinion held that it would be appropriate to leave the policy rate unchanged this time in order to carefully assess the effects of the rate hike at the previous meeting. On the other hand, another opinion held that, because underlying inflation was approaching 2% and financial conditions were accommodative, it would be appropriate to raise the policy rate and adjust the degree of monetary accommodation in response to economic, price, and financial conditions.

The government stated that it would take measures concerning the Kumamoto Earthquake by putting human life first and closely monitor its effects on livelihoods and the economy. It also indicated a policy of achieving a strong economy and fiscal sustainability together under the Basic Policy 2026, while taking market confidence into account. The government expects the Bank of Japan to manage policy appropriately through close coordination with the government, monitoring domestic and overseas economic conditions, communicating with markets, and pursuing the sustainable and stable achievement of the 2% price stability target.