MNI POLICY: BOJ Caveat To Baseline Scenario Possible

The Bank of Japan may add an annotation highlighting extreme uncertainty driven by the middle east conflict when it revises January's baseline scenario within its updated Outlook Report at the April 27-28 meeting, MNI understands.  

A similar approach was taken in the April 2025 Outlook Report, when the global economy was affected by U.S. tariffs and the BOJ included explicit caveats around uncertainty. The bank is expected to incorporate the recent surge in crude oil prices into its projections, though it is unable to provide a clear outlook for energy prices.

Policymakers will instead base forecasts for growth and inflation on working assumptions prepared by staff.

If board members’ projections diverge significantly, the BOJ may opt to present a range of forecasts rather than a median, which could be less meaningful under current conditions. Uncertainty is particularly acute for the outlook in fiscal 2027 and 2028, where officials face considerable difficulty in forming reliable projections.

However, the bank is expected to retain its core view of an economic recovery after a temporary slowdown this year, along with its rate-hike stance based on improving economic conditions and inflation.