According to the latest announcement from the Bank of Japan, Deputy Governor Shinichi Uchida presented comprehensive views on Japan's economic conditions and monetary policy management at the Kochi Financial and Economic Forum on July 23, 2025. Deputy Governor Uchida assessed that while some areas show weakness, the Japanese economy is recovering moderately. However, he expects the growth pace to temporarily slow due to impacts from trade policies of various countries, including U.S. tariff policies.
According to the Tankan survey results, business sentiment has deteriorated in some manufacturing sectors, but overall maintains favorable levels. While manufacturing profits are expected to decline by 8.4% in fiscal 2025, non-manufacturing sectors show increasing profit forecasts, with the overall corporate sector expected to maintain high profit levels. In spring labor-management negotiations, wage increases reached 5.25%, the highest level in 34 years, with particularly notable wage increases at small and medium enterprises.
Regarding price conditions, the year-on-year consumer price index excluding fresh food stood at the low 3% range as of June. While food prices, particularly rice prices, are the main contributing factors, these are expected to diminish with government responses. The underlying inflation rate is expected to temporarily stagnate due to economic slowdown, but is projected to achieve the 2% price stability target sometime between late fiscal 2026 and fiscal 2027.
Concerning monetary policy management, given that current real interest rates remain at extremely low levels, the BOJ maintains its policy of raising policy rates in accordance with improvements in economic and price conditions. Regarding the reduction plan for long-term government bond purchases, a new plan through March 2027 was decided, aiming to improve government bond market functioning by gradually reducing monthly purchase amounts. The Bank of Japan emphasized that it will maintain robust policy management based on a risk management approach given the current extremely high uncertainty.