Bank of Japan press conference — 28 April 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%.

Member Nakagawa, while noting uncertainty over the Middle East situation, judged that in light of economic conditions, upside risks to prices are high under accommodative financial conditions; Member Takata judged that the price stability target has been broadly achieved and that upside risks to domestic prices have already increased due to second-round effects from overseas-originated price rises; and Member Tamura, amid greatly expanding upside risks to prices, proposed raising the policy interest rate to around 1.0% in order to move even slightly closer to the neutral interest rate — all three submitted this proposal, but it was rejected by majority vote.

Compared with the previous Outlook Report, the price forecast for fiscal 2026 has been revised up substantially, and fiscal 2027 has also been revised up somewhat.

As for the risk balance, mainly for fiscal 2026, downside risks are judged to be larger for the economic outlook, and upside risks are judged to be larger for the price outlook.

As the Bank of Japan, given that the underlying rate of inflation is approaching 2% and that the current real interest rate is at an extremely low level, we believe that, in accordance with economic activity, prices, and financial conditions, we will continue to raise the policy interest rate and adjust the degree of monetary accommodation.

First, regarding the first question, as I mentioned earlier, in this Outlook Report, we judge that mainly for fiscal 2026, downside risks are large for the economic outlook and upside risks are large for the price outlook.

In addition, given that in present-day Japan, firms' wage- and price-setting behavior has become more proactive compared with the past, the rise in crude oil prices may be more likely than before to spill over into price increases for various goods and services.

However, given that uncertainty is high for both economic activity and prices at present regarding how the Middle East situation will unfold, the likelihood of this outlook being realized is considered to have declined compared with before.

Taking these points into account, the Bank of Japan, under the basic thinking of continuing to raise the policy interest rate and adjusting the degree of monetary accommodation in accordance with economic activity, prices, and financial conditions, will carefully examine various data and information so as not to fall behind the curve, and will appropriately judge policy at next and subsequent Monetary Policy Meetings.

currently, medium- to long-term inflation expectations vary considerably depending on which indicator one looks at, but they are approaching 2%, yet in the sense that they have not been moving around at 2% for a long time, they are not completely anchored.

That possibility — yes, as you say. However, I do not think that will be the only reason for future rate hikes.

Also, regarding communication, for example, whether to send a clear signal immediately before a rate hike, we will continue to consider what kind of communication is appropriate, taking into account the current economic and financial conditions.

amid the intensification of wage and price-setting behavior, we will pay attention to the risk that inflation expectations, especially medium- to long-term ones, rise clearly and underlying prices deviate upward, and we will appropriately activate policy so that this does not happen.

When risks materialize, I feel it is not necessarily clear whether price risks or economic risks will appear first. It is clear that prices will rise for the time being, mainly in energy-related items or goods that use them, but whether this affects underlying prices is not necessarily clear.

we raised rates last December, but considering that various financial indicators afterward show real interest rates remain negative mainly in the short- to medium-term zone, that lending volume continues to increase under those conditions, that financial institutions' lending attitudes are accommodative, and that although there are a few exceptions, the corporate bond and CP markets continue to be in good condition, we judge that the financial environment is accommodative even now.

if the upside risks to prices I just mentioned have become considerably materialized, or such risks are increasing, while on the other hand the risk of economic downside or a major economic adjustment is limited to some extent, then I think the possibility of reaching a rate hike can exist.

Having a forecast about that, and after examining the inflation risks and economic risks I mentioned earlier, I think a decision to raise rates is possible depending on the case.

I think it is highly likely that the current upward pressure on prices will appear in data a bit further ahead, but of course if the risk increases that it will rise even more, it is possible to make various judgments without waiting for that. I think it is possible to make judgments based on forecasts and outlooks.

First, this decision to leave policy unchanged was made after discussion among us and judged to be appropriate, and we continue close communication with the government, and we would like to continue that effort going forward.

If the inflation rate, especially the underlying inflation rate, clearly rises above 2% and becomes high to a non-negligible degree, there is a possibility that at some point we will be forced to tighten strongly to bring it down, and in that case, clearly, or at least as a possibility, the terminal rate could exceed the neutral rate. I think we must be concerned about the accompanying rise in economic volatility.

The possibility that real interest rates remain low for the time being, and depending on the case decline somewhat more, supports the economy and pushes prices upward — basically, while being conscious that we are somewhat below the neutral rate, we would like to conduct policy

This time, after revising the inflation outlook upward, several people additionally spoke of upside risks, and in particular the three people I mentioned earlier said that, on that basis, it was appropriate to raise interest rates.

Even in that case, unless there is a major economic downturn, there is a possibility of a rate hike when prices follow the forecast path or upside risks materialize. That being the case, the expression "in accordance with the degree of improvement in the economy and prices" is not necessarily a good fit, so we deleted or changed that part.

That depends on the definition of the word stagflation, but if things go according to our outlook, the economy will decelerate and the inflation rate will rise. However, both are temporary — although the rise in the inflation rate is expected to continue a little longer.

Broadly speaking, that is the result of the price increase in crude oil and petrochemical products gradually being passed on to various goods and, in some cases, services, proceeding slowly. But if we look at this in a bit more detail, I believe that it will peak by around the first half of fiscal 2027, and from there the inflation rate will decline, but if you take the average, I think that is what the picture for fiscal 2027 as a whole looks like.

Transcript

April 30, 2026 Bank of Japan

Governor's Press Conference — From 3:30 p.m. on Tuesday, April 28, 2026, for approximately 65 minutes

(Q) Please explain the contents of today's Monetary Policy Meeting, including the contents of the Outlook Report, Governor.

(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%. Member Nakagawa, while noting uncertainty over the Middle East situation, judged that in light of economic conditions, upside risks to prices are high under accommodative financial conditions; Member Takata judged that the price stability target has been broadly achieved and that upside risks to domestic prices have already increased due to second-round effects from overseas-originated price rises; and Member Tamura, amid greatly expanding upside risks to prices, proposed raising the policy interest rate to around 1.0% in order to move even slightly closer to the neutral interest rate — all three submitted this proposal, but it was rejected by majority vote.

Today, we published the Outlook Report, so I will explain the current situation and outlook for economic activity and prices in line with it. First, regarding the assumptions underlying this outlook. As for the Middle East situation, uncertain conditions continue, but the central outlook in this Outlook Report was formulated on the assumption that, going forward, the impact of the Middle East situation will ease, crude oil prices will decline, and no large-scale supply chain disruption will occur. Under these assumptions, for Dubai crude oil prices, referencing futures market developments and other factors, we assumed a starting point of around 105 dollars per barrel, declining to around the 70-dollar level toward the end of the projection period. It should be noted that depending on how the Middle East situation unfolds going forward, the outlook for economic activity and prices could change significantly, and this point requires attention. That said, regarding economic activity. As for the current state of Japan's economy, we judged that although some weak movements are seen due to the impact of the Middle East situation, the economy is recovering moderately. Looking ahead, for fiscal 2026, the growth pace is expected to decelerate, as the deterioration in the terms of trade accompanying the rise in crude oil prices will act as a downward pressure factor on corporate profits and households' real income. However, high levels of profits in the corporate sector and various government measures will provide support, and moderate growth is expected to be maintained. From fiscal 2027 onward, as the negative impact of high crude oil prices attenuates and the positive cycle from income to spending gradually strengthens, Japan's economy is expected to gradually raise its growth rate. Compared with the previous Outlook Report, the growth forecast for fiscal 2026 has been revised downward. Next, regarding prices. The year-on-year rate of change in the consumer price index excluding fresh food has been exceeding 2%, as the pass-through of wage increases to selling prices continues and due to the impact of rising food prices including rice, but recently it has been in the upper 1% range due to the effects of the government's energy burden mitigation measures and other factors. Looking ahead, as the pass-through of wage increases to selling prices continues, the rise in crude oil prices will act in a pushing-up direction, mainly on energy prices and goods prices,

so fiscal 2026 is projected to be in the upper 2% range. Thereafter, as the impact of high crude oil prices attenuates, the positive margin will shrink, and fiscal 2027 is projected to be in the lower 2% range, and fiscal 2028 at around 2%. During this period, with the strong labor shortage continuing, the mechanism in which wages and prices rise moderately while mutually referencing each other will be maintained, and medium- to long-term inflation expectations are expected to rise. Under these conditions, the underlying rate of increase in consumer prices is expected to gradually rise, and from the second half of fiscal 2026 through fiscal 2027, it is expected to reach a level broadly consistent with the price stability target, and thereafter to remain at around the same level. Compared with the previous Outlook Report, the price forecast for fiscal 2026 has been revised up substantially, and fiscal 2027 has also been revised up somewhat. As risk factors surrounding the above outlook, there are various ones, but for the time being, it is particularly necessary to closely monitor the impact of future developments in the Middle East situation on financial and foreign exchange markets and on Japan's economic activity and prices. For this reason, in this Outlook Report, we have provided a detailed explanation of the impact on economic activity and prices in the event that the risk scenario surrounding the Middle East situation materializes. As for the risk balance, mainly for fiscal 2026, downside risks are judged to be larger for the economic outlook, and upside risks are judged to be larger for the price outlook. While it is conceivable that both of these risks may increase, given that the underlying rate of inflation is approaching 2% and that firms' wage- and price-setting behavior is becoming more proactive, it is necessary to pay sufficient attention so that, in particular, the risk of the inflation rate rising significantly above expectations does not materialize and thereby adversely affect the economy thereafter. Regarding the Outlook Report, Member Takata submitted a proposal stating, among other things, that consumer prices are already at a level that broadly achieves the price stability target, and Member Tamura submitted a proposal stating, among other things, that the underlying rate of inflation is considered to remain at a level broadly consistent with the price stability target; each was rejected.

Finally, regarding future conduct of monetary policy. As the Bank of Japan, given that the underlying rate of inflation is approaching 2% and that the current real interest rate is at an extremely low level, we believe that, in accordance with economic activity, prices, and financial conditions, we will continue to raise the policy interest rate and adjust the degree of monetary accommodation. That said, regarding the timing and pace of adjustment, our policy is to examine the impact of developments in the Middle East situation on Japan's economic activity and prices, and to consider while checking the likelihood and risks of the central outlook for economic activity and prices being realized. The Bank of Japan, under the 2% price stability target, will conduct monetary policy appropriately from the perspective of achieving it in a sustainable and stable manner.

(Q) My first question is about risks. You have indicated your intention to carefully assess both upside risks to prices and downside risks to the economy regarding the Middle East situation. Regarding this decision, please tell us how you judged each risk and which you placed more weight on.

My second question is about monetary policy. With no prospect of supply constraints being resolved, price increases have already emerged in oil and related products. This time, interest rates were left unchanged, but how do you currently view concerns about being behind the curve?

(A)

First, regarding the first question, as I mentioned earlier, in this Outlook Report, we judge that mainly for fiscal 2026, downside risks are large for the economic outlook and upside risks are large for the price outlook. First, regarding the economy, if the Middle East tensions become prolonged and crude oil prices remain high, this could become a downward pressure factor on the economy going forward through deterioration in the terms of trade and impacts on supply chains. On this point, Japan's economy is considered to have a certain degree of resilience against such downward pressure due to the high levels of profits accumulated in the corporate sector and various government economic measures, but it is necessary to note that depending on the scale and persistence of the shock, the economy could decelerate further. On the price front, while the economic slowdown accompanying the Middle East situation acts in a direction of pushing down the underlying rate of inflation through deterioration in the output gap and other factors, overall, upside risks are considered to be larger. That is, since crude oil is widely used as a raw material from upstream to downstream across various industries, high crude oil prices act in a direction of pushing up prices not only for energy but also for a wide range of goods. In addition, given that in present-day Japan, firms' wage- and price-setting behavior has become more proactive compared with the past, the rise in crude oil prices may be more likely than before to spill over into price increases for various goods and services. It is also necessary to note that such movements may be more likely to lead to pushing up the underlying rate of inflation through rises in inflation expectations.

Regarding the second question, as I also mentioned earlier, in this Outlook Report, we have maintained the central outlook that the underlying rate of inflation will reach a level broadly consistent with the price stability target from the second half of fiscal 2026 through fiscal 2027. However, given that uncertainty is high for both economic activity and prices at present regarding how the Middle East situation will unfold, the likelihood of this outlook being realized is considered to have declined compared with before. Also, looking at the risk balance, as I mentioned, mainly for fiscal 2026, downside risks for the economy and upside risks for prices have each become larger, and at present it is difficult to assess their persistence and the relationship between the two. Under these circumstances, the Bank of Japan would like to confirm a bit further such points as how the Middle East situation will unfold and its impact on Japan's economic activity and prices — that is, whether the likelihood of the central outlook will rise again, and whether the risks surrounding economic activity and prices will change. In particular, given that the underlying rate of inflation is approaching 2% and that, as you pointed out, firms' price-setting behavior is becoming more proactive mainly for petroleum-related products, it is necessary to pay sufficient attention to whether the risk of the inflation rate rising significantly above expectations materializes and adversely affects the economy thereafter. Taking these points into account, the Bank of Japan, under the basic thinking of continuing to raise the policy interest rate and adjusting the degree of monetary accommodation in accordance with economic activity, prices, and financial conditions, will carefully examine various data and information so as not to fall behind the curve, and will appropriately judge policy at next and subsequent Monetary Policy Meetings.

(Q) Two questions, please. From fiscal 2027 onward, the growth rate is expected to return to its original level, or rather to rise, while according to the Outlook Report projections, core-core for fiscal 2027 and 2028 significantly exceeds 2%. Also, the distribution of Board members' risk assessments appears to see upside risks to prices as relatively strong.

Looking at this, it can be read that several rate hikes are being envisioned toward a near-term rate hike and the neutral interest rate — is that understanding correct? That is my first point. Also, are underlying prices and inflation expectations still not anchored at 2%? The Outlook Report reads as if it places considerable emphasis on upside risks to prices, and it appears as though the situation is already one in which a supply shock cannot be looked through. Please give us your view on that.

(A) Core-core, or even core, projections have been revised up considerably compared with the previous time, but basically, as I said earlier, this reflects the view that the rise in crude oil prices will spill over and raise prices for various goods and in some cases some services, but that this is temporary. However, depending on where one looks, the degree of temporariness may end a little sooner or be prolonged a little longer. Under these conditions, as I also mentioned, the view that underlying prices, currently somewhat below 2%, will gradually rise and become broadly established at 2% from the second half of fiscal 2026 through fiscal 2027, and then move around that level thereafter, has not been changed from the previous time. That said, having said this, the risk that the rise in the headline — to put it collectively — inflation rate will push up underlying prices is, as I mentioned earlier, something I am fully conscious of, and in assessing that risk, whether inflation expectations, which you mentioned in your second point, are anchored or not — currently, medium- to long-term inflation expectations vary considerably depending on which indicator one looks at, but they are approaching 2%, yet in the sense that they have not been moving around at 2% for a long time, they are not completely anchored. Therefore, I believe we must keep in mind the possibility that they may fluctuate upward or downward from here and monitor various things.

(Q) Two questions, please. First, regarding future risks, you have previously mentioned risks in both directions, and in this Outlook Report, while touching on both, there is a mention of paying particular attention to the materialization of upside risks to prices. The price outlook has also been revised upward, but the decision to forgo a rate hike under these circumstances — is this because, at present, the downside risk to the economy and the upside risk to prices are fifty-fifty, and beyond that, the upside risk to prices becomes larger?

Please also address my second point. Regarding the assessment of the current pace of rate hikes, with the real interest rate at an extremely low level, rates have been kept unchanged for three consecutive meetings. Meanwhile, the timing for achieving the price stability target has not changed, and the price outlook has been revised upward. You also mentioned earlier that you would like to confirm a bit further, but when would be the next time a rate hike could be made for this to be consistent monetary policy conduct?

(A) I believe your question was about how the upside risks to prices and downside risks to the economy were assessed and why the status quo was maintained this time. If I were to state the basic reason for maintaining the status quo in one phrase, it is that the likelihood of the central outlook declined considerably this time. Behind that, as risk scenarios, we must be attentive to particularly upside risks to prices and downside risks to the economy. Going forward, to add further, regarding the economy, I would like to be conscious of and monitor particularly the risk of whether a major economic adjustment phase will come, and regarding prices, I would like to focus on whether there is a risk that underlying prices will clearly rise above expectations from here — the

One point is whether, as you say, you need to pay attention — whether you are starting to feel the possibility that you may have to raise interest rates in response to upside risks.

And the other point is about future communication. Regarding this meeting, I understand that in the market, before the interest rate hikes last January and December, there were clear signals of a rate hike. For this meeting, since there was no such signal, predictions that there would be no rate hike increased. In the future, amid this very difficult situation and high economic uncertainty, as Governor, when you feel the need to raise interest rates, do you intend to clearly send a signal to the market, or do you think that is somewhat difficult in this kind of situation? Please let us know.

(Answer) Your first question is whether there will be a rate hike in response to upside risks to prices, is that correct?

(Question) Whether you are starting to feel that possibility.

(Answer) That possibility — yes, as you say. However, I do not think that will be the only reason for future rate hikes.

Also, regarding communication, for example, whether to send a clear signal immediately before a rate hike, we will continue to consider what kind of communication is appropriate, taking into account the current economic and financial conditions.

(Question) I would like to ask about two points based on your past remarks. First, regarding upside risks to prices, in a speech about two years ago in May 2024 titled "The Virtuous Cycle of Wages and Prices and Future Monetary Policy Management," you said that if the price outlook were to deviate upward, or if upside risks to prices were to increase, it would be appropriate to adjust the policy interest rate sooner.

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Looking at the current Outlook Report, I repeat, but as someone in a position to control prices under accommodative conditions, it seems you are quite conscious of upside risks. Could you tell us the reason why this meeting's policy decision and action were not accompanied by a rate hike, and also from the perspective of consistency with your past remarks and dialogue?

And the other point is about the multilateral review that was decided to be undertaken at the April 2023 meeting, which you attended for the first time as Governor three years ago. At the press conference immediately after, regarding the review period of one and a half years, you said that with the five-year term of the Governor and Deputy Governors in mind, you wanted to make use of the review results during your term. The remaining term is already less than two years, but looking at the year-based forecasts and actual results shown in the Outlook Report, the possibility has emerged that inflation of around 3%, exceeding the 2% target, will continue throughout your term. Once again, could you share your view on whether the Bank of Japan's examination results are serving the 2% price stability target?

(Answer) First, as I mentioned earlier, for the time being the headline inflation rate will rise somewhat. This does not immediately mean a rise in the underlying inflation rate, but amid the intensification of wage and price-setting behavior, we will pay attention to the risk that inflation expectations, especially medium- to long-term ones, rise clearly and underlying prices deviate upward, and we will appropriately activate policy so that this does not happen.

Regarding the second point and the relationship with the review, one conclusion of the review is that in the period up to around 2021 and 2022, medium- to long-term expectations for prices and wages, or the economic norms related to such things, had become anchored near zero, and it was extremely difficult to break out of that. Currently, we have been able to escape from that to some extent, and medium- to long-term expected inflation is approaching 2%, but as was also asked earlier, I am not confident that we have reached the point where it is anchored there. Therefore, as you said, the headline inflation rate will deviate somewhat upward for the time being, but we would like to strive for policy management that anchors it to 2% as much as possible.

(Question) I would like to ask one question. Unlike the Fed and ECB, whose policy rates are within the neutral rate, the Bank of Japan's current policy rate is below the neutral rate. Even if maintained at the current level, the financial environment remains accommodative. On one hand, that works to push up prices, and on the other hand, it works to support the economy. The impact of high oil prices and supply shocks has already appeared fairly quickly in prices, but I think it will take time from here for production activity and consumption. Listening to what you said earlier, I think you are currently placing the emphasis on upside risks to prices, but going forward, if economic downside risks grow depending on the data, how are you thinking about policy response at present? Thank you.

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(Answer) When risks materialize, I feel it is not necessarily clear whether price risks or economic risks will appear first. It is clear that prices will rise for the time being, mainly in energy-related items or goods that use them, but whether this affects underlying prices is not necessarily clear. And if supply chain problems spread, it is conceivable that the impact on the economy may appear relatively quickly. Therefore, I would like to make judgments without preconceptions, and to appropriately adjust the future conduct of monetary policy according to the degree to which such risks materialize.

(Question) I would like to ask one question. First, I would like to ask about the distance to the neutral rate. How close or far do you think we are from the neutral rate, and amid the current need for greater attention to upside risks to prices, do you also have the recognition that this is not a phase to rush rate hikes? Please tell us about that.

(Answer) We have exchanged views on this point many times, but I feel that there are considerable limits for the time being to narrowing down the range of the neutral rate through methods such as data analysis. Under such circumstances, while also referring to such results, we have been able to judge whether the financial environment is accommodative, perhaps not reaching the sense of distance to the neutral rate, by carefully examining how financial and economic conditions develop after each rate hike. To put it a bit more concretely, we raised rates last December, but considering that various financial indicators afterward show real interest rates remain negative mainly in the short- to medium-term zone, that lending volume continues to increase under those conditions, that financial institutions' lending attitudes are accommodative, and that although there are a few exceptions, the corporate bond and CP markets continue to be in good condition, we judge that the financial environment is accommodative even now.

(Question) The first point is a confirmation. In your earlier answer to a question, you said that the judgment followed the idea that look-through is appropriate for temporary factors. At present, does that mean that the rise in crude oil prices accompanying the tense Middle East situation has not yet had such an impact in the sense of broad-based price increases or so-called second-round effects accompanying wage increases, or in the sense of impact on underlying prices? Also, please tell us your recognition of what kind of changes would need to appear in the future for you to confirm that such an impact has emerged.

And the second point is also related. Earlier, regarding the reason for maintaining the status quo, you explained that the certainty of the central outlook is low. There is a possibility that it will remain low or fall further at the next June meeting. Even in such a situation, do you think that if second-round effects can be confirmed, that would be a sufficient reason to justify a rate hike?

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(Answer) Could you repeat the first question once more?

(Question) I believe you explained earlier that the judgment was made in line with the idea of look-through for temporary factors. To confirm your recognition on this point, is it correct to understand that because at present there has not yet been a movement in which the confusion in the Middle East situation or the accompanying rise in crude oil prices leads to broad-based price increases or is accompanied by wage increases, look-through is appropriate, and that this was the basis for the current decision?

(Answer) On that point, as a risk, I would like to watch it carefully, but at present, for example, in terms of what I have been saying, I recognize that something like a large jump in medium- to long-term expected inflation has not occurred, so while paying attention, I think that at present it has not reached that point.

Also, in relation to future policy management, I believe your question was whether a rate hike is possible even if the certainty of the central outlook is low. This also overlaps somewhat with what I have said so far, but if the upside risks to prices I just mentioned have become considerably materialized, or such risks are increasing, while on the other hand the risk of economic downside or a major economic adjustment is limited to some extent, then I think the possibility of reaching a rate hike can exist.

(Question) I would like to ask two questions. First, I will ask in relation to the Middle East situation. In the Outlook Report this time, reference is made to the risk of large-scale supply chain disruption. The Strait of Hormuz is still effectively closed, but if the state continues in which the risk of supply chains being severed due to logistical constraints remains, do you think that during that period the environment for raising rates will not be in place?

Another point. By postponing a rate hike this time, there will be a gap of about one and a half months until the next meeting in June. Whether or not to raise rates in June will of course depend on the data at that time, but amid quite strong upward pressure on prices, how much risk do you think there is that prices will rise more than expected during this one and a half months?

(Answer) I believe the question is whether a rate hike decision is possible even if the Strait of Hormuz remains effectively closed, but that depends on what the situation regarding the Strait of Hormuz looks like beyond that point. Having a forecast about that, and after examining the inflation risks and economic risks I mentioned earlier, I think a decision to raise rates is possible depending on the case.

Also, I believe your question was about the risk that prices rise significantly between now and June, but I think there may be cases where very clear and large upward pressure does not appear in the data up to June at the consumer price stage. I think it is highly likely that the current upward pressure on prices will appear in data a bit further ahead, but of course if the risk increases that it will rise even more, it is possible to make various judgments without waiting for that. I think it is possible to make judgments based on forecasts and outlooks.

(Question) I recognize that before this policy meeting, there were considerable remarks from the government side about the policy interest rate. Once again, what do you think about the Bank of Japan's autonomy and independence, and do you have any concerns about interactions with the Takaichi administration?

(Answer) First, this decision to leave policy unchanged was made after discussion among us and judged to be appropriate, and we continue close communication with the government, and we would like to continue that effort going forward.

(Question) In the 1970s, there were years when the inflation rate exceeded 20% year on year and the wage increase rate in the spring wage negotiations exceeded 30%. As Governor Ueda, how much risk do you see at present that Japan could enter a situation like that of the 1970s?

(Answer) In the 1970s, especially in the first half, during the first oil shock, inflation was severe. Looking back, before crude oil prices turned upward, the economy was already considerably overheated, and prices and wages were in a state of high growth rates. Then crude oil prices rose, and it became even worse. There was also the issue of the monetary policy response. Looking at the current situation, I think that before the current worsening of the Middle East situation, the economy was not extremely overheated, nor were prices and wages in a situation where prices were rising far above 2% and wages far above that plus productivity growth. Therefore, I think the possibility of a situation like the first half of the 1970s is not particularly high, but the only point is that in terms of initial conditions, there is the initial condition that the actual policy rate is at least below the neutral rate, so I would like to conduct policy management while paying attention to that point.

(Question) In the current Outlook Report, where this risk was mentioned, the expression used was quite forceful, saying that sufficient attention must be paid so that inflation does not deviate significantly upward and adversely affect the economy afterward. This was very striking. In other words, is it saying that if future responses are mistaken, there is a risk that the Bank of Japan's terminal rate could significantly exceed the neutral rate and adversely affect the economy, and that sufficient attention must be paid to such risk?

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(Answer) If the inflation rate, especially the underlying inflation rate, clearly rises above 2% and becomes high to a non-negligible degree, there is a possibility that at some point we will be forced to tighten strongly to bring it down, and in that case, clearly, or at least as a possibility, the terminal rate could exceed the neutral rate. I think we must be concerned about the accompanying rise in economic volatility.

(Question) Earlier you said that real interest rates remain negative through the medium term, but for the time being upside deviation in prices will continue and corporate and market inflation expectations are rising, so it is conceivable that the negative width of real interest rates will deepen further for the time being. In that case, I think there is a possibility that upside risks to prices will be strengthened further. Amid these upside and downside risks, how do you think about the relationship between monetary policy and a phase in which real interest rates decline? Please.

(Answer) The possibility that real interest rates remain low for the time being, and depending on the case decline somewhat more, supports the economy and pushes prices upward — basically, while being conscious that we are somewhat below the neutral rate, we would like to conduct policy

And we will continue to work to grasp the actual situation while coordinating with overseas authorities.

(Q) I would like to ask about underlying inflation. The Bank of Japan recently began using a new indicator of underlying inflation, but over these 13 years it has repeatedly replaced the indicators used to gauge underlying inflation. Each time, it has continued to miss its inflation forecasts almost every time. Why did this happen? Each time, was it not the case that it used underlying inflation data that was convenient — how should I put it — to fit its policy? And as a result, one could take the view that it was unable to apply the correct policy. What does the Governor think about this?

(A) Regarding underlying inflation, we did not develop some new indicator and then, how should I put it, conveniently announce it to the public to steer discussion when we released the one that excludes temporary factors last time. This is part of the indicators we have been looking at all along. As for the reason we released it at this timing, I may have said this last time, but as headline inflation is declining in the near term, and that decline is temporary due to government policy —

(Q) Excuse me, um, I am not asking about the reason for this replacement, but about the past.

(A) About the past — which part in particular?

(Q) For example, using the overall consumer price index, using the one excluding fresh food, using the one excluding fresh food and energy, using the trimmed mean — each time, how should I put it, it looks as though you put forward whichever indicator was convenient to fit your policy, and although you may of course have been using all of them, it looks as though you used them as material for your explanations. As a result, is it not possible that past policy made incorrect judgments?

(A) First, setting aside whether policy was mistaken or not, looking at headline inflation, the one excluding fresh food, the one excluding energy, the one excluding energy and food — wanting to look at underlying inflation in a broad sense is something that virtually all central banks do, and I believe we are not doing anything particularly unusual.

(Q) I would like you to tell us with a bit more precision about the change in your assessment compared with the previous meeting in March. At the previous press conference, you said you had the impression that the number of people who wanted to emphasize upside risks to prices was slightly larger. This time, as for that number, has it increased compared with the impression last time that it was slightly larger? And has the atmosphere in the Policy Board as a whole — that it must prepare for upside inflation risks — become stronger than last time? If you could convey your impression in as easy-to-understand words as possible, I would appreciate it.

(A) It is difficult to say how many people compared with last time, but if I compare with last time, at the March point the outlook was still the one from January, and I think that in comparison with that, everyone, or at least a certain number of people, was speaking of upside risks. This time, after revising the inflation outlook upward, several people additionally spoke of upside risks, and in particular the three people I mentioned earlier said that, on that basis, it was appropriate to raise interest rates.

(Q) On page 9 of the Outlook Report, at the very end, I believe there is this time an expression saying that the Bank will continue to raise the policy interest rate and adjust the degree of monetary accommodation in accordance with economic, price, and financial conditions. I think the difference is that the phrase "in accordance with improvement" that was there before has been removed. Should we take this to mean that, in this Outlook Report, the economy for fiscal 2026 is revised downward compared with last time, and even though economic improvement is difficult, the Bank will continue raising rates — that it has somewhat stopped linking economic improvement and rate hikes? And also, regarding stagflation, which came up a little in a question earlier, please tell us once again whether we are now in stagflation, or whether we are not yet in stagflation but the possibility is gradually rising.

(A) On the first part, as I said in my answers to various questions today, as for the pattern of future rate hikes, the typical pattern is of course one that follows along as the certainty of the outlook rises, but even so, even if things go as forecast, the growth rate will decline somewhat for the time being. Even in that case, unless there is a major economic downturn, there is a possibility of a rate hike when prices follow the forecast path or upside risks materialize. That being the case, the expression "in accordance with the degree of improvement in the economy and prices" is not necessarily a good fit, so we deleted or changed that part. Sorry, what was the second point?

(Q) Please let me confirm once again whether we are now in stagflation, or whether we are not yet in it but the possibility is rising.

(A) That depends on the definition of the word stagflation, but if things go according to our outlook, the economy will decelerate and the inflation rate will rise. However, both are temporary — although the rise in the inflation rate is expected to continue a little longer.

(Q) I would like to ask once again about the inflation outlook. The consensus view is that core-core will remain high at 2.6 to 2.7% in fiscal 2027 as well, and while I understand that the assumptions include the Middle East situation easing and no large-scale disruption to supply chains, even so the level seems high to me and it caught my attention. I would like to ask about the detailed view here — whether we can take it that, while an extreme supply shock in which supply is cut off is not assumed, the forecast for fiscal 2027 incorporates to some extent the fact that prices of related products rose as a secondary effect of higher crude oil prices, and that such effects are expected to persist for more than a year.

(A) Broadly speaking, that is the result of the price increase in crude oil and petrochemical products gradually being passed on to various goods and, in some cases, services, proceeding slowly. But if we look at this in a bit more detail, I believe that it will peak by around the first half of fiscal 2027, and from there the inflation rate will decline, but if you take the average, I think that is what the picture for fiscal 2027 as a whole looks like.

(Q) At the next policy meeting in June, there will be an interim assessment of the government bond purchase reduction plan. Is there a possibility that the decision to review the purchase plan and the decision to raise interest rates will be considered as a set? Or do you

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