Bank of Japan press conference — 19 March 2026

What this says

At today's Monetary Policy Meeting, we decided by majority vote to maintain the guideline for money market operations of encouraging the uncollateralized overnight call rate to remain at around 0.75 percent. In addition, Member Takata proposed a motion to raise the policy interest rate to around 1.0 percent, arguing that the price stability target has been broadly achieved and that the risk of domestic inflation overshooting is high due to second-round effects of overseas-originated inflation, but the motion was rejected by majority vote.

As for the outlook, as the effects of rising prices of food items such as rice diminish, and with the effects of the government's measures against high prices, the year-on-year rate of change in the consumer price index excluding fresh food is expected to shrink its positive margin to below 2 percent for a time, and thereafter the effects of the recent rise in crude oil prices will work in the direction of expanding the positive margin.

During this period, the mechanism in which wages and prices rise moderately while referencing each other is expected to be maintained, and thereafter, as the economy continues to improve and labor shortage feelings intensify, medium- to long-term inflation expectations are expected to rise.

Risk factors surrounding the outlook include future developments in the Middle East situation and crude oil price movements, overseas economic and price developments affected by the trade policies of various countries, firms' wage and price-setting behavior, and financial and foreign exchange market movements, and it is necessary to pay sufficient attention to their impact on Japan's economy and prices.

In conducting monetary policy, given that the current real interest rate is at a very low level, if the economic and price outlook as described above is realized, it is thought that we will continue to raise the policy interest rate and adjust the degree of monetary accommodation in accordance with improvements in economic and price conditions.

Next, regarding the second question, as for whether and when to raise rates going forward, as before, we will make appropriate judgments at each Monetary Policy Meeting while confirming the outlook and the probability and risks regarding economic and price conditions and the underlying rate of inflation.

On the other hand, if the rise in crude oil prices or the yen's depreciation leads to a rise in people's medium- to long-term inflation expectations, that is thought to work to push up the underlying rate of inflation.

It is also necessary to bear in mind that such movements may be stronger than in the past — for example, compared with the time of import price rises after Russia's invasion of Ukraine — under circumstances where firms' wage and price-setting behavior is becoming more active.

In addition, in foreseeing the future development of the underlying rate of inflation, for the time being we would like to examine the situation of wage increases in the spring wage negotiations and firms' price-raising movements, and confirm whether the mechanism in which wages and prices rise sustainably is working.

However, on top of that, one more thing that must not be forgotten is that, setting aside the Middle East situation, our outlook was that underlying prices would rise gradually and reach 2 percent in the latter half of the projection period, and that is the premise. We will judge including whether it will overshoot or undershoot from there.

At that time, as I believe I always say, I would like to monitor and analyze while paying attention to the point that, compared with the past, the pass-through of exchange rate fluctuations to domestic prices, and further to underlying prices, may recently have become stronger.

Naturally, we also look at upside and downside risks, and if we judge that there is a significant risk that cannot be ignored, I think there is not zero possibility that, from a risk-management-type approach, we would place emphasis on the risk side in considering policy.

If you simply calculate a standard Taylor rule by plugging in the inflation rate and so on, I think it would probably produce a fairly high interest rate—one considerably higher than the actual policy rate.

Ultimately, to put it bluntly, it is not easy in the first place to judge what the underlying inflation rate is, and because of that, we too have struggled.

First, regarding the spring wage negotiations, judging from the information that has come out so far, I think it is becoming a solid outcome. However, as you said, a major point going forward is how much wage increases at small and medium-sized enterprises will amount to, and we also see this as one major point.

In cases where second-round spillover effects occur strongly, as you said, strong price increases across a wide range of items would continue, and that would spill over into wages and then into prices again—that would mean second-round effects are clearly occurring.

We are naturally monitoring daily the impact of the Middle East situation on international financial and capital markets, including domestic ones. I think there is some degree of decline in risk sentiment, so we will carefully watch this in making policy decisions.

From the more general standpoint of how financial conditions overall should influence policy decisions, of course the key point is the standard analysis of how asset price fluctuations affect the economy and prices, but at the same time, as sometimes happens, when a major shock occurs, it is also necessary to check whether the financial system may become unstable.

At present, I do not think at all that we have reached such a systemic financial problem.

Against that, the change in the Middle East situation, if taken by itself, naturally brings downward pressure on the growth rate and upward pressure on the inflation rate. However, how it affects underlying prices—that is, long-term inflation—is a difficult point, and what kind of shape this will take when all of this is put together is something we would like to show in the April Outlook Report after carefully examining the data that comes in going forward.

But as I have always said, regarding the degree of confidence that this outlook will be realized, it has declined somewhat compared to before, and to that extent the possibility of the risk scenario has increased, and within the risk scenario, a risk scenario associated with rising crude oil prices has newly emerged — we placed weight on this point and decided to maintain the status quo. As I also mentioned, as more data and information become available toward next month, we plan to review the outlook once again, review the risk scenarios as well, and make an appropriate policy judgment anew.

However, to repeat, we will carefully monitor the impact of exchange rate fluctuations on the economy and prices — especially, as you say, on prices and, by extension, on underlying inflation. Furthermore, I would add that we will keep in mind that the impact of exchange rate fluctuations on domestic prices has become stronger than in the past, and as a result, the possibility that they affect underlying inflation has also increased.

Whether this relates to that wording or not, even if the growth rate were to decline, if that is rather temporary and, including that, does not significantly affect the path of underlying inflation, then naturally a rate hike is possible, I believe. This wording may be difficult to understand in some respects, so in the April statement, including an explanation of the results of the exercise of reviewing the outlook once again, I would like us to consider it once more.

What is important on such occasions, to add to what I have discussed and answered so far, is that medium- to long-term inflation expectations are anchored near the target inflation rate, I believe.

The Bank of Japan, as I always say, is approaching the target of 2% but still has some distance to go, I think.

We always review the information available up to each meeting and intend to conduct appropriate policy accordingly.

You said that if not for the heightened tensions in the Middle East, the Bank of Japan would have been moving in line

Transcript

March 23, 2026 Bank of Japan

Governor's Press Conference — From 3:30 p.m. on Thursday, March 19, 2026, for approximately 65 minutes

(Q) Please explain the content of today's Monetary Policy Meeting.

(A) At today's Monetary Policy Meeting, we decided by majority vote to maintain the guideline for money market operations of encouraging the uncollateralized overnight call rate to remain at around 0.75 percent. In addition, Member Takata proposed a motion to raise the policy interest rate to around 1.0 percent, arguing that the price stability target has been broadly achieved and that the risk of domestic inflation overshooting is high due to second-round effects of overseas-originated inflation, but the motion was rejected by majority vote.

First, I will explain the economic and price situation. As for the current state of Japan's economy, we judged that it has been recovering moderately, although some weak movements have been seen. As for the outlook, while being affected by various countries' trade policies and other factors, with overseas economies returning to a growth path, and supported by the government's economic measures and accommodative financial conditions, the positive cycle from income to spending is expected to gradually strengthen, and therefore the economy is expected to continue growing moderately. However, in response to the heightened tensions in the Middle East, unstable movements have been observed in international financial and capital markets, and crude oil prices have also risen significantly, so attention to future developments is necessary. As for prices, the year-on-year rate of change in the consumer price index excluding fresh food had been exceeding 2 percent, with the pass-through of wage increases to selling prices continuing and the effects of rising prices of food items such as rice, but recently it has declined to around 2 percent due to the effects of the government's measures to ease the burden of energy costs. As for the outlook, with the effects of rising prices of food items such as rice diminishing and the effects of the government's measures against high prices, the year-on-year rate of change in the consumer price index excluding fresh food is expected to temporarily shrink its positive margin to below 2 percent, and thereafter the effects of the recent rise in crude oil prices will work in the direction of expanding the positive margin. During this period, the mechanism in which wages and prices rise moderately while mutually referencing each other is expected to be maintained, and thereafter, with the economic improvement continuing, labor shortage feelings will intensify, and medium- to long-term inflation expectations are expected to rise. Under these circumstances, the underlying rate of increase in consumer prices is expected to gradually heighten, and in the latter half of the projection period of the Outlook Report, it is thought to be at a level broadly consistent with the price stability target. It should be noted that attention is also necessary regarding the impact of crude oil price increases on the outlook for the underlying rate of price increases. Risk factors surrounding the outlook include future developments in the Middle East situation and crude oil price movements, overseas economic and price developments affected by various countries' trade policies, firms' wage and price-setting behavior, and financial and foreign exchange market movements, and it is necessary to pay sufficient attention to their impact on Japan's economy and prices.

Next, regarding the conduct of monetary policy going forward. In conducting monetary policy, given that the current real interest rate is at a very low level, if the above economic and price outlook is realized, I believe that we will continue to raise the policy interest rate and adjust the degree of monetary accommodation in accordance with improvements in economic and price conditions. The Bank of Japan, under the 2 percent price stability target, from the perspective of achieving it in a sustainable and stable manner, will conduct monetary policy appropriately in accordance with economic, price, and financial conditions.

Finally, although this is somewhat technical, let me add a few words about our information dissemination. Looking ahead at future price developments, due to the effects of the government's measures against high prices and the impact of crude oil price increases, consumer prices are likely to fluctuate easily in the short term, and it will become difficult to grasp the underlying trend of prices. In light of these points, from the perspective of capturing the underlying inflation rate going forward, we intend to provide more careful explanations, including by expanding and publishing core indicators of the consumer price index. Also, in light of the recent benchmark revision of GDP statistics, the Bank's staff are re-estimating Japan's potential growth rate and output gap, and are also re-estimating the natural rate of interest using the latest data. We are considering publishing these as soon as preparations are complete.

(Q) The first question is about the impact of the escalating Iran situation on Japan's economy and prices. With attacks being exchanged between the United States and others and Iran, under such circumstances, there is a risk that the deterioration in the terms of trade could push down the economy, while if crude oil prices continue to surge, prices could be pushed up and overshoot. In considering monetary policy, this is, so to speak, a trade-off relationship, but which will you place more emphasis on in your judgment — supporting the economy or rising prices? Also, please tell us your view on how the uncertainty of the Middle East situation will affect monetary policy decisions.

The second question. This time, monetary policy was maintained, but please tell us your thinking toward the next rate hike. At the previous press conference in January, you said that rather than narrowing down checkpoints, you would judge from various indicators how the pace of price and wage increases continues. Considering the current situation, circumstances differ from then, with uncertainty heightened by the Iran situation and it becoming a risk factor — please tell us in detail your thinking toward the next rate hike, including what points you will focus on in making judgments going forward.

(A) First, regarding the first point, at today's Monetary Policy Meeting, while attention to the outcome of the Middle East situation is of course necessary, we decided to maintain our central outlook that Japan's economy will continue to grow moderately and that the underlying rate of price increases will achieve the price stability target in the latter half of the projection period. However, as you pointed out, if crude oil prices continue to surge, the possibility increases that the economy will be pushed down through the deterioration in the terms of trade. On the other hand, the rise in crude oil prices may push up the underlying rate of price increases in the short term by pushing up energy prices, and also through increases in firms' and households' inflation expectations. If such a situation were to arise, your question was whether we would place emphasis on suppressing inflation or supporting the economy in conducting monetary policy, but I believe it is difficult to answer this in a general way. Speaking in general terms, I believe that after taking into account the magnitude of the impact of price increases and economic deterioration, ultimately we will choose the most appropriate response from the perspective of achieving the 2 percent price stability target in a sustainable and stable manner. In any case, we would like to appropriately judge policy while updating our outlook and risks for the economy and prices, and the probability of the outlook being realized, based on various data and information available at that time, including the impact of the Middle East situation.

Next, regarding the second question, as for whether and when to raise rates going forward, as before, we will make appropriate judgments at each Monetary Policy Meeting while confirming the outlook and the probability and risks regarding the underlying rate of price increases. That said, for the time being, as you pointed out, how the Middle East situation affects Japan's economy will be an important point. As a premise, I believe that the data of the past few months — that is, data before the outbreak of and changes in the Middle East situation — showed robustness in both income and spending for both firms and households. Furthermore, various economic measures by the government are also expected to contribute positively to economic growth. Under these circumstances, we will examine going forward the extent to which the deterioration in the terms of trade accompanying the rise in crude oil prices may push down the economy. As for the underlying rate of price increases, I believe it can fluctuate in both directions going forward. That is, if downward pressure is placed on the economy and the output gap deteriorates, that will be a factor pushing down the underlying rate of price increases. On the other hand, if the rise in crude oil prices and the yen's depreciation lead to an increase in people's medium- to long-term inflation expectations, that is thought to work to push up the underlying rate of price increases. It is also necessary to bear in mind that such movements may be stronger than in the past — for example, compared with the time of import price increases after Russia's invasion of Ukraine — under circumstances where firms' wage and price-setting behavior is becoming more active. It should be noted that, in foreseeing the future development of the underlying rate of price increases, for the time being we would like to examine the situation of wage increases in the spring wage negotiations and firms' price-raising movements, and confirm whether the mechanism in which wages and prices rise sustainably is working. Also, on that occasion, as always, in addition to various data, we would like to carefully analyze hearing information from our Head Office and branches that is accumulated as needed.

(Q) I have two points. First, I would like to ask again about policy responses to high crude oil prices. In the past, there have been situations of sudden crude oil surges in times of emergency; for example, in the Second Oil Shock, it is said that the BOJ tightened monetary policy early and thereby kept the impact relatively minor. On the other hand, in the 2022 Russia-Ukraine war, the BOJ maintained monetary easing, while central banks in Europe and the United States initially took somewhat cautious responses and were later forced into so-called behind-the-curve rapid rate hikes — this is still fresh in memory. Of course, this time the BOJ's response will change depending on future developments, but based on such past lessons, please tell us what posture you think is correct to take going forward.

The second point. I would like to ask about dialogue with the government. The government presented to the Diet personnel proposals for two Policy Board members who are said to be so-called reflationists, and I believe today they were approved by the House of Representatives. Some voices see this as a check by the Takaichi administration on the BOJ, but Governor, do you think dialogue with the government and the administration is currently going well? Going forward, when you try to raise rates in a difficult situation said to involve risks on both sides — economic deterioration and price overshooting — do you think you can obtain the government's understanding under these circumstances?

(A) Regarding the first point, I believe your question is about how we will act this time compared with monetary policy responses in past supply-shock-like situations, and I too have been reviewing over the past week or so Japan's responses in, for example, the 1970s that you pointed out, and more recently from 2021 to 2022 and afterward, including in Europe, the United States, and Japan, the responses of central banks. While referring to these as well, as a basic line, as I answered in the second question from the moderator earlier, I would like to choose the most appropriate response ultimately from the perspective of achieving the 2 percent price stability target in a sustainable and stable manner.

As for the latter part of your question, first, regarding the personnel appointments of the new Policy Board members themselves, since the appointment procedures are underway, I would like to refrain from commenting. That said, regarding dialogue with the government, we have been making strenuous efforts to have close exchanges of views, and I believe this has been carried out well. I would like to continue close exchanges of views going forward.

(Q) I have two questions. I would like to ask about the impact of high crude oil prices. Until now, I believe the BOJ's stance has been that it is difficult for monetary policy to respond to supply shocks or temporary factors. Regarding this time, is it correct to understand that if it judges that underlying prices are likely to be pushed up, that will become material for considering a rate hike? However, I think it takes a certain amount of time to judge whether the impact reaches the underlying trend, so until then, is your thinking to wait and see?

Another question: along with high crude oil prices, I believe yen depreciation pressure is strengthening. Please tell us how you think the heightened tensions in the Middle East this time will affect foreign exchange rates. Not only high crude oil prices, but also whether the yen's depreciation this time will affect the judgment on rate hikes through its impact on prices or underlying prices — I would like to ask about this point as well.

(A) First, regarding the former part, basically I believe one principle is to look through temporary supply shocks, but as you said, it is extremely difficult to say in advance by when one can know what impact there will be on underlying prices while it is difficult to judge whether something is temporary, so at each Monetary Policy Meeting, we would like to make the maximum judgment based on the information obtained up to that point. That said, one more thing that must not be forgotten is that, setting aside the Middle East situation, our outlook was that underlying prices would rise gradually and reach 2 percent in the latter half of the projection period, and that is the premise. We will judge including whether it overshoots or undershoots from there.

Also, regarding how the Middle East situation will affect foreign exchange rates, I would like to refrain from commenting specifically, but of course, as I always say, we will carefully monitor the impact of exchange rate fluctuations on prices or underlying prices. On that occasion, as I believe I always say, I would like to monitor and analyze while paying attention to the point that, compared with the past, the pass-through of exchange rate fluctuations to domestic prices, and further to underlying prices, may have become stronger recently.

(Q) Two points, please. First, although it is still somewhat difficult to judge the balance between downward pressure on the economy and upward pressure on prices, listening to your remarks so far, if such a supply shock has occurred while prices are already approaching 2

This is a key point, and based on that premise, we will then summarize how we view risks as deviations from that outlook. Whether the central outlook is maintained or changed, or even if maintained, whether the degree of confidence rises or falls — that is the biggest point. Naturally, we also look at both upside and downside risks, and if we judge that a risk is significant and cannot be ignored, I think there is a non-zero possibility that we would consider policy with emphasis placed on the risk side, from a kind of risk-management approach.

As for the Tankan, first of all, the information we want to obtain is naturally both how strong the economy has been up to now and what the additional impact of the Middle East situation has been. However, regarding the latter part, whether we have been able to capture it well in relation to the timing of collecting responses — I feel we will not know unless we look at the distribution of response collection. So I would like to explain again after the Tankan is released, at an appropriate timing, either myself or from the responsible department.

(Q) I have two questions based on your past remarks. First, regarding the fact that two years have passed since you stepped into monetary policy normalization — at the press conference after deciding on normalization, you said that regarding the path of the policy rate, the Taylor rule is always in the minds of those who decide monetary policy. But at the same time, you also said that depending on how you set the levels of variables to be put into the rule/formula and the parameter values, the appropriate interest rate level that comes out can vary extremely widely. You have only raised rates four times so far, and there does not seem to be much sense that rate hikes are working as tightening.

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But I would like to ask whether these points have been organized to some extent.

And the other point is about the 0.25% rate hike in the summer of the year before last. After that additional rate hike, the markets were somewhat unstable, and the Governor was called to the Diet, among other things. At the press conference in September immediately after that, you cited a paper presented at that year's Jackson Hole and explained the lag in the market's incorporation of inflation. Specifically, regarding U.S. financial markets, the observation was that although inflation was already quite high before the Fed decided to raise rates, it was only after the Fed actually raised rates that the market fully priced in rate hikes, and you said that changing market expectations requires more effort than usual. In Japan too, there is now a sense that the market has finally begun to price in the achievement of the 2% price stability target, but is the speed of incorporation just naturally like this, or is there some market-specific bias or positioning that makes it slower than reality? Since this is a milestone, I would like to hear your recognition and views on this point, Governor.

(A) Both of your questions, in a sense, ultimately seem to relate to the topic of underlying inflation. The first half, I believe, was a question about how to think about the Taylor rule in relation to this meeting or what is currently ongoing. If you simply calculate a standard Taylor rule by plugging in the inflation rate and so on, I think it would probably produce a considerably high interest rate — a rate considerably higher than the actual policy rate. Normally, even when thinking in terms of a Taylor rule, rather than using the current inflation rate, because there are lags in monetary policy and lags before effects emerge, one would incorporate the forecast for future inflation and so on. If you take that to its logical conclusion, it comes to incorporating the underlying inflation rate, and if that is the case, I think it is not so different from what we are doing.

And regarding the point that it takes time for the market to incorporate inflation developments, or that it is difficult to get the market to incorporate them well — I think this also stems from the fact that when inflation rises sharply, it is extremely difficult to predict how long it will continue rising and how the central bank will respond to that. Ultimately, to put it bluntly, it is not easy in the first place to judge what the underlying inflation rate is, and because of that, we too have struggled. Today, as I mentioned earlier, I spoke a little about expanding technical published indicators, but in our communication, we will make further efforts, and I would like us to work so that both we and the market can have a common view and understanding regarding underlying inflation.

(Q) Two points, please. Regarding the shunto spring wage negotiations, at yesterday's集中回答日 (day of concentrated responses), full-amount responses came one after another, but how do you evaluate the results of the shunto so far, including the impact on the rate-hike decision? At present, crude oil prices are also rising due to the worsening Middle East situation, but please tell us how you think this will affect wage increases at small and medium-sized enterprises, which will get into full swing from now on.

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The second point is — this also came up in an earlier question — amid the uncertain outlook for the Middle East situation and with headline inflation also declining, on what points do you plan to focus in communicating and explaining to the government regarding your future rate-hike policy? I would appreciate hearing your thoughts.

(A) First, regarding the shunto — judging from the information that has come out so far, I think it is becoming a solid outcome. However, going forward, as you said, a major point is how much wage increases at small and medium-sized enterprises will amount to, and we also see this as one major point. In advance information, there seemed to be a lot of information suggesting that the spread to small and medium-sized enterprises would be considerably broader than in previous years, but Rengo's tally covering a portion of small and medium-sized enterprises will also come out soon, so while referring to that and also referring to our own hearings, we would like to carefully examine this area.

Next, regarding headline inflation and inflation excluding fresh food versus underlying inflation — they are likely to move differently, especially for the time being — I believe your question was about how communication with the government is on this point. In my impression, both the government side and the administration side often do not necessarily call it the underlying inflation rate, but they understand well the importance of something akin to it and the difference between that and headline inflation, and I do not feel there is any discrepancy between us on this point.

(Q) Earlier, you said that at the meeting, many members pointed out upside risks to underlying prices. I am sorry to be direct, but in OIS, the probability that the BOJ will conduct an additional rate hike at the April meeting is at a relatively high 60%. First, I would like to ask the Governor whether it is even possible to discern the direction of the underlying inflation rate in response to higher crude oil prices over a term of one or two months.

The second point is about the case in which a rate hike becomes necessary even amid downside risks to the economy from rising crude oil. Is that something envisioned when inflation expectations rise and so-called second-round effects occur, in which wages and prices rise cyclically at high levels? Or is such a judgment possible at the stage when a broad rise in crude oil prices is spreading to a wide range of items? Even in such a case, would a rate hike be necessary? Please share your thoughts, Governor.

(A) I believe the first half of your question was whether judgments about underlying prices can be made in a short period of time. Of course, when something happens, judging its impact — especially its impact on underlying prices — in a short period is a rather difficult task. But underlying prices themselves are judged as if by integrating various data from the past, and when a new shock occurs on top of that, we judge how much the view we have held so far will shift. So while a precise judgment is difficult, I think it is possible to know even in a short period things like which direction it is likely to move, or, even if it fluctuates, roughly how much.

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Also, regarding the response to supply shocks, I believe the question is how to judge whether there will be second-round effects. In cases where second-round spillover effects occur strongly, I think that means what you described — strong price increases across a wide range of items continue, and that spills over into wages, and then again into prices — and that is when second-round effects are clearly occurring. At what stage one can capture that it is likely to become a considerable second-round effect depends on the situation at the time; sometimes it becomes clear early, and sometimes one cannot know without waiting quite a while, so I think it cannot be said in general terms.

(Q) Please let me ask two questions. First, stock prices have fallen due to the worsening Middle East situation. Amid difficulty in forming a forward outlook, there may be a possibility that instability in financial markets will continue. Even in such an environment, would you raise rates depending on the inflation situation? Or would you have to be cautious about rate hikes until the market environment stabilizes? Please share your view on this point.

Second, I believe the BOJ has said that future rate hikes will be judged by taking into account financial conditions in addition to economic and price conditions. How do you think the current worsening of the Middle East situation and higher crude oil prices will affect financial conditions going forward? Please also share your thoughts on this point.

(A) We are of course watching daily the impact of the Middle East situation on international financial and capital markets, including domestic ones. I think there is a part where risk sentiment has somewhat declined, so we will carefully monitor this in making policy decisions.

From the more general standpoint of how financial conditions overall should influence policy decisions, of course the key point is the classic analysis of how asset price fluctuations affect the economy and prices, but at the same time, as sometimes happens, when a major shock occurs, it is also necessary to check whether the financial system may become unstable. At present, we do not think at all that we have reached such a systemic financial problem.

(Q)

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Two points, please. In this directive, I believe the economic outlook is basically left unchanged, but in the markets there are voices murmuring concerns about stagflation. Apart from your basic outlook, Governor, please tell me to what extent you are considering the possibility of stagflation and how much concern you have about it.

The other point is about the information dissemination you mentioned at the beginning. With just the earlier explanation, I could not quite follow. As the Bank of Japan, what exactly are the issues in information dissemination, and how do you plan to expand CPI, the output gap, and the potential growth rate, and how do you intend to improve or upgrade communication? Please explain a little more.

(A) First, this time we left the central outlook unchanged, and I believe your question was about which direction it would likely move if revised when some additional information comes in going forward, but I think it is difficult to say anything definite about that. First, as I mentioned a little earlier, looking at the data up to the point before the Middle East situation changed, I think there was a lot of information and data that justified the outlook up to that point — what is often called "on track." On the other hand, some people view it as slightly on the strong side. Against this, the change in the Middle East situation, taking that alone, naturally brings downward pressure on the growth rate and upward pressure on the inflation rate. However, how it affects underlying prices — that is, long-term inflation — is a difficult point, but what kind of shape this will take when all of this is put together is something we would like to show in the April Outlook Report, after carefully examining the data that comes in going forward.

Also, I believe the second question was about what exactly the publication of new data indicators related to underlying prices is. When judging underlying prices, we look at indicators that exclude fresh food and energy, which are very prone to short-term fluctuations. Those are already published. In addition, as factors that make it hard to see underlying movements, there are some government measures — what we call institutional factors — for example, the effect of tuition-free policies. Such things affect the inflation rate for one year from when the policy is announced and implemented, and then disappear after one year, in the sense that they have a temporary effect. We are considering, for example, publishing what it would look like if such things were excluded from several already-published price indices. This kind of work is something we have been doing all along when looking at underlying prices, but by sharing it with all of you, I think it will contribute to the objective of making judgments about underlying prices as common as possible between us and all of you, as came up earlier.

(Q) You have been talking all along about the underlying inflation rate, and I understand that the BOJ conducts policy by looking at that underlying inflation rate. But in exploring underlying prices, the more items you exclude, the more the figures become detached from people's daily lives. Amid this distortion that has been occurring all along, I would like to ask how you feel about the difference between the underlying inflation rate that the BOJ says it uses to decide policy and the view of prices that the public feels. Thank you.

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(A) As you say, if you keep excluding what appear to be temporary fluctuations, there is always a risk that, like peeling an onion, the more you peel away, the less core remains. From our standpoint, in order to look at as much as possible the medium- to long-term trend in inflation, we try various indicators and make comprehensive judgments. That said, as you pointed out, many of the things excluded when looking at underlying prices are energy and food, items that have a large impact on people's daily lives. For one thing, we want to look with an open mind at whether there are items among them that will persist for a long time, and although they may be excluded from the underlying measure, we will always keep in mind that, for example, the overall consumer price index has a large impact on people's daily lives, and that it has exceeded 2%

But as I have always said, the degree of confidence that this outlook will be realized has declined somewhat compared to before, and the possibility of the risk scenario has increased accordingly. Among the risk scenarios, a new risk scenario involving rising crude oil prices has emerged, and it is with emphasis on this point that we decided to maintain the status quo. As I also mentioned, as more data and information become available over the coming month, we plan to review the outlook once again, review the risk scenarios as well, and make an appropriate policy judgment anew.

(Q) You have said that going forward you will look at both upside and downside risks to prices, to the underlying trend of prices. But looking at the world, central banks around the world are generally more concerned about upside risks, and expectations for rate hikes are rising in the markets as well — or rather, expectations for rate cuts are diminishing. In such an environment, if the Bank of Japan places emphasis on downside risks, there is a risk that downward pressure on the yen will intensify, and the impact of yen depreciation on the underlying trend of prices will become larger. How do you think about this going forward?

(A) As I said earlier in response to someone else's question, I will refrain from commenting on how the yen or the foreign exchange market will move. However, to repeat, we will carefully monitor the impact of exchange rate fluctuations on the economy and prices — especially, as you mentioned, on prices and ultimately on the underlying trend of prices. Furthermore, I would add that we will keep in mind that the impact of exchange rate fluctuations on domestic prices has become stronger than in the past, and as a result, the possibility that they affect the underlying trend of prices has also increased.

(Q) I'd like to ask about the relationship between the new information disclosure and monetary policy that you have been explaining. Does releasing a new indicator of underlying inflation ultimately aim at making it easier to explain the reason for a rate hike when one is made — frankly speaking, at making rate hikes easier — or is that not the case? Furthermore, you mentioned the output gap earlier; as an extension of that, are you also considering releasing updated estimates of the natural rate of interest or the neutral interest rate? Please let us know about that point.

(A)

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The underlying trend of prices itself is a difficult concept to grasp, I apologize, and ultimately we have no choice but to look at various indicators and make a comprehensive judgment. Among these, we want to additionally release indicators that we consider important and that can be published, and discuss them with all of you — there is no intention to immediately steer policy in one direction or the other through this. Also, in conjunction with revisions to GDP data, we are proceeding with re-estimating the GDP gap and re-estimating the neutral interest rate, and we are considering publishing the results once they are ready.

(Q) I'd like to ask about Deputy Governor Uchida, who is continuing treatment for leukemia. At this meeting, he has attended in an irregular manner for three consecutive meetings. Given that the Deputy Governor holds a very pivotal position, could you tell us whether there has been any hindrance to his day-to-day duties, and what you think the prospects are for his return going forward?

(A) From the perspective of day-to-day duties, he is handling them sufficiently via telephone, email, telework, and so on. However, from the standpoint of avoiding infection, for example, he participated remotely in today's policy meeting. As for when he will physically return, we are currently waiting for his doctor's judgment.

(Q) In today's statement as well, the same wording as before is included. Regarding future monetary policy conduct, it states to the effect that the Bank will continue to raise the policy interest rate in accordance with improvements in economic and price conditions. I'd like to reconfirm the meaning of the phrase "in accordance with improvements in economic and price conditions" — when crude oil prices rise and prices temporarily increase while the economy slows, I still don't quite understand the situation in which a rate hike would still be possible. So I'd like you to explain once again in relation to this wording.

(A) Whether this relates to that wording or not, even if the growth rate were to decline, if that were rather temporary and, including that, would not much affect the path of the underlying trend of prices, then naturally a rate hike would be possible, I believe. I think this wording has aspects that are hard to understand, so in the April statement, including an explanation of the results of the exercise of reviewing the outlook once again, I would like us to reconsider it once more.

(Q) Regarding stagflation that has come up repeatedly, you said at the beginning of the press conference that you were reviewing past examples such as the oil shocks. Is there a nuance that you are doing such reviewing because you, as Governor, are taking stagflation itself into consideration? Also, if such a situation were truly prolonged and the impact were large, should we understand that the Bank would make a judgment in line with the basics of monetary policy — focusing on price stability — just as in similar cases the Bank adopted in the past?

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Could you tell us about that point?

(A) I was looking at past cases, but there is not much ulterior motive; as a general matter, I was looking at them as a review of how monetary policy has responded in the past when so-called negative supply shocks occurred. What is important in such cases, to add to what I have discussed and answered so far, is that medium- to long-term inflation expectations remain anchored around the target inflation rate — I think that is important.

(Q) There was a question about this earlier as well, but regarding the impact of rising crude oil prices due to the heightened tensions in the Middle East, the situation in Iran this time, there will be global effects, and central banks in various countries will take various actions. In that context, during the Ukraine war when prices rose sharply last time, while overseas central banks were raising rates, the Bank of Japan at that time continued monetary easing, large-scale easing. When making judgments this time, could you tell us whether you would take into view some degree of coordination — not exactly coordination — with other countries' central bank policies? Also, in what you have been saying about reviewing data up to next month's meeting and making an appropriate judgment, please confirm once again whether adjusting the degree of monetary easing — so-called rate hikes — is also included in that judgment.

(A) As for whether there is any move to conduct policy jointly with overseas central banks in response to this situation, as was the case in the past, I believe each will decide what it considers optimal. Compared to four years ago, at that time for the Bank of Japan, in terms of the underlying trend of prices, it had stabilized at a very low level, while for other countries it started from a somewhat higher level — I think that was a major difference. And at present, for other countries, the underlying trend of prices is roughly around their targets, I believe. The Bank of Japan, as I always say, is approaching the target of 2% but still has some distance to go, I think. What was the latter part of your question? Sorry.

(Q) I believe you answered in response to various questions earlier that next month you will review the data and make an appropriate judgment. Should we understand that this judgment includes adjusting the degree of monetary easing — so-called rate hikes?

(A) We always review the information available up to each meeting and, in accordance with that, we intend to conduct appropriate policy.

(Q)

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You said that

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