MNI BRIEF: BOJ Ups FY25 CPI To 2.7%; Price Risk Balanced

The Bank of Japan on Thursday raised its median forecast for core consumer prices in fiscal 2025 to 2.7% from 2.2% in April, citing stronger-than-expected price moves driven by surging rice costs and their spillover to food prices, following the Board's decision to hold the policy rate at 0.5%.

The BOJ also shifted its view on inflation risks from the downside to neutral, stating, “risks to prices are generally balanced.”

Markets are closely watching Governor Kazuo Ueda’s post-meeting press conference for clues on the outlook for policy and inflation.

Inflation forecasts for fiscal 2026 and 2027 were also revised higher to 1.8% and 2.0%, from 1.7% and 1.9%.

Still, the BOJ cautioned that “underlying CPI inflation is likely to be sluggish, mainly due to the deceleration in the economy,” though it maintained that inflation is likely to align with the 2% target in the latter half of the projection period to March 2028.

The GDP forecast for this fiscal year was raised to 0.6% from 0.5%, while projections for fiscal 2026 and 2027 were unchanged at 0.7% and 1.0%.