Main Opinions at the October 29–30 Policy Meeting

The Bank of Japan’s “Main Opinions at the Monetary Policy Meeting” for the October 29–30, 2026 meeting is organized into I. Opinions on Economic and Financial Conditions, II. Opinions on Monetary Policy Conduct, and III. Government Opinions. Each Monetary Policy Board member and government representative summarizes the views they expressed at the meeting within a set character limit and submits the summary to the chair, who edits the items under their own responsibility.

The section on economic and price conditions is divided into economic conditions and prices. The section on policy conduct covers financial conditions, interest rate adjustments, and ETF sales. Government opinions are presented separately for the Ministry of Finance and the Cabinet Office.

On economic conditions, participants acknowledged some weakness due to developments in the Middle East but said the domestic economy is recovering moderately. In fiscal 2026, higher energy and raw material prices are expected to weigh on growth, but rising global demand related to AI and various government measures are expected to provide support, allowing growth to continue at a slower pace. From fiscal 2027 onward, the negative effects of higher energy and raw material prices are expected to fade, and the growth rate is projected to rise moderately. AI demand is expected to push up economic activity and prices, while its spillovers to Japan are concentrated in semiconductor materials and manufacturing equipment, as well as data centers; participants also urged caution about its durability. The consumption activity index declined in July–August compared with April–June. Although household consumption has been firm against a backdrop of improving employment and income conditions, some participants said it lacks the strength to drive the economy. Other opinions held that, amid global AI demand, price pressures, and overseas rate-hiking cycles, the norm that had brought about decades of deflation is thawing. They described a regime shift in which Japan is regaining links with overseas economies and becoming exposed to ordinary business cycles.

On prices, participants said that persistent labor shortages are sustaining a mechanism in which wages and prices refer to and gradually raise each other, and judged that underlying inflation is at a level broadly consistent with the 2% price stability target. They said they would assess companies’ pricing, consumer responses, and the pace of wage and price increases, while closely monitoring next year’s spring wage negotiations. Some companies expect wage increases next year to be on par with this year, and some participants saw the possibility of continued wage increases consistent with the 2% target. Others said a substantial rise in wage growth is unlikely and that the risk of second-round effects from price increases to wages is not high. Participants also identified the effects of policy-driven declines in consumer prices on wage negotiations, current inflation driven by higher crude oil prices and its limited second-round effects, and the possibility that past rate increases could push economic activity and prices below expectations as points to monitor. Some said both expected inflation and actual results must be checked to determine whether expectations of 2% inflation have become entrenched. Another view pointed to upside risks of underlying inflation exceeding the target and concern that it could become more responsive to exogenous shocks.

On monetary policy conduct, some participants proposed assessing financial conditions along three dimensions: the real interest rate gap, corporate financing and bank lending channels, and asset prices. They said it was also important to consider that factors outside monetary policy, such as global AI demand, are influencing share prices and other indicators. Some considered it appropriate to hold the policy interest rate steady while assessing risks to the economy and prices, financial conditions, and the cumulative effects of past rate increases. Others said financial conditions remain accommodative and called for continued rate increases, or for bringing rates to the neutral level sooner, given that underlying inflation has reached the target. Some said inflation would settle around 2% even without rushing to raise rates. Others noted that the current policy rate is within the estimated range for the neutral interest rate and urged caution about the risk that further increases could weigh on the economy and underlying inflation. Participants assessed that the next rate increase could restrain business and residential investment, while improving the balance of the economy overall, with no marked net negative effect on personal consumption.

Participants explained that ETF sales had proceeded smoothly since they began in January this year, for about one year, without a major market impact, and that total market trading value had also expanded. In light of this, some said it would be appropriate or desirable to reassess the sale amount and review the pace at a suitable time. They said the Bank should consider the effects on corporate governance of central bank holdings and examine a sale amount expected to have little disruptive impact.

The Ministry of Finance called for an appropriate decision on the ETF disposal guidelines, with the proposal informed by past disposal results and other factors. It also said it expects the Bank of Japan to coordinate closely with the government, communicate with markets, and conduct policy to achieve the 2% price stability target sustainably and stably. The Cabinet Office said the Japanese economy is at a turning point in determining whether it can move into a virtuous cycle of growth. It called for anchoring underlying inflation at a level consistent with the target, making an appropriate decision on the ETF disposal guidelines, and conducting policy in coordination with the government.