日银审议委员増（MASU Kazuyuki）在福井地方领袖会上重申将继续加息至中性利率区间，未给出新时点或新政策动作

MASU Kazuyuki
Member of the Policy Board
Bank of Japan
September 10, 2026
(English translation based on the Japanese original)
Economic Activity, Prices,
and Monetary Policy in Japan

Speech at a Meeting with Local Leaders in Fukui

1
I. Prices
The Iran Situation
Before beginning my speech, I would like to offer my heartfelt sympathies to those who are
suffering from the recent heavy rain.

A little over a year has passed since I was appointed as a member of the Policy Board. During
this time, the whole world has wrestled with two major issues related to the United States:
one concerning tariffs and the other concerning the Iran situation.

The tariff issue, unexpectedly, did not cause any economic disruption in Japan, although it
did impact primarily sectors that have high export volumes to the United States, such as
automobiles. In contrast, the Iran situation has had far broader repercussions. The supply of
crude oil and other materials has tightened due to the closure of the Strait of Hormuz. This
could induce both a rise in inflation and a deceleration in economic activity, placing central
banks worldwide in a difficult decision-making environment.

In terms of the impact on Japan, crude oil and liquefied natural gas (LNG) have shown
different price dynamics. Crude oil prices have risen due to a shortage of supply, whereas
LNG prices have increased even without such a shortage. Chart 1 presents price developments
in crude oil and LNG.

In the case of crude oil, Japan recently faced a situation in which slightly more than 70 percent
of its crude oil imports passed through the Strait of Hormuz. There were greater concerns
over a tightening in the supply of chemicals than over a shortage of transportation fuel derived
from crude oil -- such as gasoline and light oil. Given the fact that plastic products have
become widespread over the past 50 years, there is a possibility that the impact of the shortage
of crude oil has become more serious than it was during the oil shocks in the 1970s. At the
moment, though, the necessary amount of the supply of transportation fuel and chemicals has
been maintained, albeit with significantly higher prices, through the release of national
reserves and alternative procurement of crude oil and other materials.


2
LNG makes up about 30 percent of Japan's energy mix, and is also used as city gas. Contracts
of LNG imports with Qatar are down from their previous levels, and imports that passed
through the Strait of Hormuz have only accounted for around 6 percent of Japan's total
volume of LNG imports, which can be covered by spot contracts. There is therefore no
concern about the volume of LNG imports. However, since many LNG contracts are linked
to crude oil prices, changes in crude oil prices are reflected in LNG prices with a time lag of
around four months. Following Russia's invasion of Ukraine, LNG prices increased
significantly due to a surge in spot prices. While this has not been the case this time, future
price increases may be unavoidable.

Inflation
Inflation can be driven by various factors, which can be divided into demand- and supply-
side aspects. One example of the former is hotel charges in Japan. These charges have risen
drastically, due mainly to the effects of increased inbound tourism.

On the supply side, a typical example would be temporary supply shocks, such as spikes in
crude oil prices. While such temporary shocks tend to attract public attention, there are other
factors that have a more constant influence. In Japan, increases in personnel expenses and
distribution costs may be a case in point. Unlike temporary shocks, these factors do not
dissipate over a short period and therefore have an enduring influence on prices.

Chart 2 shows some representative price indicators. From left to right, these are the consumer
price index (CPI), the corporate goods price index (CGPI), and the services producer price
index (SPPI).

Generally speaking, "prices" refer to the CPI. While there were times when the CPI inflation
rate was negative -- which is referred to as deflation -- Japan's economy has now fully
transitioned into inflation. The CPI inflation rate has most recently been on the decline, but
this is because rice prices have stabilized and because of government policy factors, such as
the abolition of the provisional gasoline tax rate and measures to make high school tuition
effectively free. While the decline owing to such policy factors is considered temporary, what

3
consumers actually pay are the reduced prices. That said, it should be noted that such reduced
prices can also stimulate demand and thus act to push up general prices.

The CGPI tracks business-to-business transactions. The index tends to be relatively high
because it comprehensively captures the effects of increases in crude oil and other raw
material prices throughout commercial flows, and these effects weaken at downstream stages,
reflecting lower cost ratios. Moreover, the cost of products includes personnel expenses,
distribution costs, and profit margins; an increase in the CGPI therefore does not directly
correspond to an increase in the CPI. However, now that firms are increasingly passing on
cost increases to selling prices, higher corporate goods prices need to be regarded as pushing
up consumer prices more than in the past, and attention should be paid to the recent 7 percent
increase in the CGPI.

The SPPI includes not only services such as dining-out and accommodation, which fall
outside the realm of manufacturing, but also distribution- and information-related costs. This
index is therefore driven largely by personnel expenses.

Personnel Expenses
While the macroeconomic indicators I just mentioned are indeed important in assessing prices,
having worked for many years in a commercial business, I am particularly interested in
understanding in detail how things work and what mechanisms lie behind them. Let me start
by examining personnel expenses.

The left panel of Chart 3 indicates the data for wages excluding overtime pay and bonuses,
which closely approximate base pay. Recent data show a growth rate of around 3 percent.
The wage increase of 5-6 percent mentioned in the annual spring labor-management wage
negotiations in Japan includes seniority-related wage increases. In terms of how individuals
feel in their daily lives, that is probably the more relevant figure. However, because a firm's
workforce is constantly turning over, with older workers retiring and new graduates being
hired, wage data that more closely reflect base pay should be examined.


4
The wage growth rate is a key determinant of monetary policy. Economic activity can be
stable only when there is a moderate cycle of firms passing on higher wages to selling prices
and then responding to the ensuing inflation with wage increases. A situation where neither
wages nor prices rise, as seen during Japan's deflationary period, and a situation where both
rise excessively, as in the first oil shock, are both unfavorable for the economy.

As shown in the right panel of Chart 3, the rate of change in real wages -- which is calculated
by subtracting the inflation rate from the rate of change in nominal wages -- is what matters
for households. Even if wages increase, household income will be negative on a net basis
unless the wage hikes keep up with inflation. However, the year-on-year rate of change in
real wages has finally turned positive in Japan. If the inflation rate moderates to around the
Bank's target level of 2 percent while wage hikes of around 3 percent continue, the rate of
change in real wages will remain positive. That said, attention needs to be paid to the fact that
the recent inflation rate has been suppressed by subsidies and other government policy factors.
Corporate managers generally raise wages in line with the inflation rate and pass on these
increased wages to selling prices; even a temporary decline in the inflation rate could
therefore affect wage negotiations.

I often hear that the combination of wage increases and policy interest rate hikes is causing
difficulties for firms. It is indeed not hard to imagine the significant challenges business
owners are facing, given labor shortages and the need to comply with the increase in the
minimum wage in Japan. However, if the inflation rate cannot be contained at an appropriate
level, this could lead to a vicious cycle in which firms have to further raise wages to retain
workers. The Bank considers that, to ensure that the wage increases firms have managed to
achieve are not in vain, it is important to manage the inflation rate through appropriate
monetary policy and thereby maintain real wage growth.

Regarding recent labor shortages in Japan, let me explain one set of data that has caught my
attention. The left panel of Chart 4 shows labor-related data. The number of employed persons
has increased due to the growing participation of women and seniors in the labor force, while
working hours have decreased due to working-style reforms and other factors. Labor input,
calculated by multiplying the number of employed persons and working hours, has remained

5
more or less flat, albeit on a slight decline. To be sure, there are mismatches among industries
and job types -- industries such as construction and nursing care services are facing severe
labor shortages. Hence, if some areas are facing shortages while overall labor input has
remained flat, that implies that some areas are not experiencing shortages. I am paying
attention to how wage increases in the latter areas will take shape.

The right panel of Chart 4 presents the distribution of the growth rate in the number of
employed persons by prefecture, and shows that regional disparities are widening. Given that
the growth rate in the number of employed persons for Fukui Prefecture is roughly 10 percent
below the national average, I believe the business leaders participating in the meeting today
might be feeling an acute sense of labor shortage.

Distribution Costs
Next, I would like to touch on distribution costs. The left panel of Chart 5 shows the year-on-
year rate of increase in motor freight transportation costs -- a component of the above-
mentioned SPPI -- which surged to almost 6 percent for July. The rate remains high, even
though gasoline prices have declined on a year-on-year basis, as suggested in the right panel
of Chart 5, due to the reintroduction in mid-March 2026 of gasoline subsidies; this could
imply a substantive pass-through of personnel expenses triggered by high crude oil prices.

Since higher distribution costs are passed on to a wide range of prices, they could affect
underlying inflation, which I will discuss later. Of course, distribution costs and personnel
expenses are not the only components of production costs, so a rise in these costs does not
directly translate into an increase in the inflation rate.

Food Prices
Let us now look at food prices, which have a large weight in the CPI.

The left panel of Chart 6 illustrates the breakdown of the CPI over the past few years, which
I mentioned earlier. Specifically, the bar graph shows, in descending order, the contribution
to the year-on-year rate of change in the overall CPI of the prices of (1) services such as
communications, hotel services, and education; (2) goods excluding food and energy; (3) rice-

6
related items, which consist of both rice itself and processed food that uses rice as an
ingredient, such as box lunches, rice balls, and rice crackers; and (4) other food excluding
fresh food, shown in dark blue.

As you can see, food prices have a significant impact on CPI inflation. To make this clearer,
the right panel of Chart 6 plots the year-on-year rates of change in the prices of some of the
components in the left panel. Fresh food and energy, for which prices fluctuate significantly,
are often excluded when examining prices. The price surge in rice-related items is pronounced,
reflecting an unprecedented rise in rice prices, which doubled from 2024 to 2025. Comparing
the other three components, however, while the year-on-year rates of change in the prices of
services and goods have both been stable in the range of 1-2 percent, the rate of change in the
price of processed food that does not use rice as an ingredient has been high, in tandem with
the rise in rice prices. The subsequent start of a decline in rice prices was expected to present
challenges to food manufacturers, since they had been raising selling prices along with the
rise in rice prices. Nevertheless, factors such as higher distribution costs and the increase in
the prices of packaging materials and food trays could create an environment that would
prompt another round of price increases, sparking concerns about a reacceleration of food
price hikes. While the prices of rice and crude oil have garnered attention, I consider that,
from a long-term perspective, the price of food in general is a key determinant of future
inflation.

Other Risk Factors
In addition to the Iran situation, the Bank is closely monitoring developments in foreign
exchange rates and in AI-related demand as risk factors to prices.

Foreign exchange policy falls under the jurisdiction of the government, and the Bank does
not set its policy interest rate to respond directly to changes in foreign exchange rates. That
said, the impact of the yen's depreciation on prices has become more pronounced than in the
past and warrants close attention.

Mounting AI-related demand is pushing up prices not only of semiconductors themselves,
but also of semiconductor production equipment, copper, and power-generation facilities.

7
The effects of this demand increase are also being felt in general consumer goods, including
personal computers and household electrical appliances. The rapid global expansion in AI-
related demand can be regarded as a demand shock that exerts strong upward pressure on
prices as well as on corporate profits and other economic variables. Unlike high crude oil
prices or the yen's depreciation, however, it is not simply the case that it would be better if
AI-related demand subsided -- such demand is also a factor that mitigates the negative effects
of high crude oil prices and supports the global economy. If momentum in AI-related demand
stalls, therefore, the impact on Japan's economy would be significant. Moreover, unlike the
United States and China, Japan is not a global provider of AI services; rather, the country is
benefiting from the demand generated by AI development, particularly for semiconductor-
related materials and equipment. It is necessary to bear in mind, therefore, that these benefits
could diminish once the expansion of AI production capacity comes to a halt.

II. Economic Indicators
Real Interest Rate
Next, I would like to explain some representative indicators the Bank is monitoring. Having
already touched upon prices, exchange rates, and wages, let me start with the two types of
interest rates that are referred to in relation to the Bank's monetary policy.

The real interest rate is calculated by subtracting the inflation rate from the nominal interest
rate. Chart 7 shows 1-year and 10-year real interest rates. These rates are obtained by
subtracting inflation expectations -- calculated using a synthesis of multiple statistical
data -- from the current yields on Japanese government bonds (JGBs). Until last year, both of
these rates were significantly negative. Now, however, they are at around 0 percent, reflecting
factors such as the Bank's policy interest rate hikes and the rise in long-term interest rates.

That said, the 1-year to around 2-year real interest rates are still negative. As a result, increases
in the value of real estate purchased through borrowings exceed the interest paid on the loans,
and this could consequently set off a surge in real estate prices. In addition, firms might hasten
their investment more than is necessary, while household savings might lose their real value.
I therefore believe the negative real interest rate situation should be addressed as soon as
possible, since Japan's economy is no longer in deflation.

8
Neutral Interest Rate
Although the neutral interest rate is an indicator that central banks always keep in mind in
conducting monetary policy, this rate cannot be expressed as a specific figure.

The calculation of the neutral interest rate begins with estimating the natural rate of interest,
which neither heats nor cools economic activity. As shown in the left panel of Chart 8, the
natural rate of interest is estimated using various theoretical models, and the estimates fall
within a fairly wide range. These are the latest figures, released in March this year. At the
time they came out, it had been two and a half years since the previous release. The overall
range has remained largely unchanged, and is estimated to be between minus 0.9 percent and
plus 0.5 percent.

The natural rate of interest is the real interest rate before adjusting for inflation. Adding 2
percent, which is the Bank's price stability target, makes this rate nominal, somewhere in the
range of 1.1 to 2.5 percent. This estimated range is what the media refers to as the neutral
interest rate. For comparison, the policy interest rate currently set by the Bank is 1.0 percent.

Given that various methods are used to estimate the neutral interest rate and that it can only
be indicated within a fairly wide range, this rate is simply a reference. In particular, since
policy interest rate hikes over the past two years have brought the rate close to the estimated
range of the neutral interest rate, the Bank will need to more thoroughly examine factors such
as prices, employment, and financial conditions in considering further rate hikes.

Unlike in Europe and the United States, the policy interest rate in Japan is lower than the
estimated range of the neutral interest rate, as shown in the right panel of Chart 8. Until
recently, many other central banks around the world continued to cut policy interest rates to
bring them closer to the neutral interest rate, while the Bank of Japan has been raising its rate.
The reason Japan alone has a policy rate that is below the estimated range of the neutral
interest rate could be attributable to differences in the degree of impact from global inflation
following the COVID-19 pandemic and in the responses to this inflation. As shown in Chart
9, post-pandemic inflation was not as high in Japan as it was in Europe and the United States.
Japan was thus able to maintain a negative interest rate policy. There is also a view that Japan's

9
mild inflation was attributable to the inability of firms to easily pass on higher raw material
costs to selling prices because of prolonged deflation in this country.

In dealing with U.S. tariffs, while sharing the same concerns about economic deterioration,
Japan and other countries took opposite policy approaches -- raising or cutting the policy
interest rate. Currently, the Iran situation has led countries around the world to tilt toward a
stance of rate hikes to address inflationary concerns, and central banks in many countries are
actually raising their policy interest rates. That said, financial conditions in Japan remain
accommodative. If inflation accelerates here, there is a risk that the Bank might inevitably
need to implement a rapid policy interest rate hike. To complete the normalization of
monetary policy in Japan, I am convinced that the Bank needs to raise the policy interest rate
further, so that it falls solidly within the estimated range of the neutral interest rate, thereby
ensuring the flexibility needed to swiftly adjust the policy rate in either direction, depending
on economic conditions.

Impact of Policy Interest Rate Hikes on Firms and Households
It is also important to monitor the impact of policy interest rate hikes on firms and households.

Chart 10 shows corporate demand for funds. There is no indication that the recent policy
interest rate hikes have dampened firms' appetite for funding -- on the contrary, their appetite
appears to have increased. However, there are concerns about potential overheating in
corporate investment activities. Investing requires both discernment and prudence. Failed
investments could rapidly cool corporate activities and hinder Japan's economic growth.

To observe the direct impact of policy interest rate hikes on households, let us look at the total
amount of households' balance sheets in Japan and the asset and liability structure by age
group in Chart 11. This indicates that, overall, households are in a net asset surplus when
comparing cash and deposits with loans. However, younger generations face the burden of
housing loans, although recent wage increases for this age group have been relatively higher
than for other age groups.


10
Underlying Inflation
Let me also discuss underlying inflation, which the Bank uses as a reference. Underlying
inflation excludes fresh food prices, which fluctuate significantly, and temporary
factors -- namely, the surge in rice prices, the crude oil shock, and the effects of government
measures such as tax hikes and subsidies. It is an important concept in conducting monetary
policy, which, in Japan, currently aims at achieving sustained inflation of 2 percent.

As with the natural rate of interest, underlying inflation cannot be expressed as a specific
figure. The Bank's quarterly Outlook for Economic Activity and Prices (Outlook Report) had
previously shown selected indicators for underlying inflation. From the April 2026 Outlook
Report, the Bank has started to show more of the indicators that it monitors on a regular basis
in this regard, such as those using statistical methods and economic models. Charts 12 and 13
summarize these indicators.

As you can see, developments in the indicators vary, and the impression they give may differ
depending on the viewer. That said, my impression is that, although the underlying inflation
rate remains below 2 percent, it is very close to the 2 percent target.

III. Recent Monetary Policy
Policy Interest Rate
Lastly, I would like to discuss the Bank's monetary policy, focusing in particular on its policy
interest rate and balance sheet.

As shown in Chart 14, the Bank has made an exit from the prolonged period of unprecedented
monetary easing and has implemented five policy interest rate hikes since March 2024.
Before each Monetary Policy Meeting (MPM), which is held eight times a year, the Bank's
Policy Board members thoroughly examine a wide range of data, such as on business fixed
investment and financial market conditions, in addition to the data I explained earlier.

While the Bank will continue to raise the policy interest rate and adjust the degree of monetary
accommodation in response to developments in economic activity and prices as well as

11
financial conditions, what is most vital from now on is to ensure that the underlying inflation
rate does not significantly exceed 2 percent.

The rising prices of fuel and chemicals due to the Iran situation may turn out to be a temporary
shock, but also have the potential to further push up costs that would have far-reaching effects,
such as distribution costs. This applies to food as well: in addition to higher domestic
distribution costs, the rise in maritime shipping fees for imported raw materials and in the
price of imported fertilizers are some factors that contribute to food price hikes. There are
concerns that the price hikes in these goods may not be temporary shocks but rather represent
more enduring trends that risk pushing up overall prices.

Given that the underlying inflation rate is very close to 2 percent, as I explained earlier, and
that financial conditions have been accommodative, the Bank will continue to raise the policy
interest rate and adjust the degree of monetary accommodation. It will consider the timing
and pace of adjustment, while examining the likelihood of realizing the baseline scenario and
the risks to the outlook presented in the July 2026 Outlook Report, including the impact on
economic activity and price developments from crude oil prices, AI-related demand, and
developments in foreign exchange rates.

Balance Sheet
Following its decision at the September 2025 MPM on a guideline for the disposal of
exchange-traded funds (ETFs), the Bank decided at the June 2026 MPM to halt the reduction
of its purchase amount of JGBs. The expression "to halt the reduction" may sound a little
confusing, but it simply means that the Bank will keep its amount of JGB purchases constant
for the time being, from fiscal 2027. After having conducted large-scale JGB purchases
during the period of unprecedented monetary easing, the Bank has been gradually reducing
the amount of its purchases since summer 2024, but has now arrived at the decision to halt
the reduction. The Bank's annual JGB purchases amounted to as much as 135 trillion yen at
their peak four years ago but, from fiscal 2027, the level will be about 2 trillion yen per month,
or roughly 24 trillion yen annually.


12
Since JGBs carry maturities, the amount outstanding will decrease simply by dint of the Bank
reducing the amount of its purchases. As shown in the right panel of Chart 15, the Bank's JGB
holdings stood at nearly 590 trillion yen at their peak. This accounted for about 50 percent of
the amount outstanding of JGBs issued, which was remarkably high relative to the proportion
of government bonds held by central banks in other major economies. Looking ahead,
however, the Bank's JGB holdings are expected to decline steadily.

What JGB maturities the Bank should hold in the future is likely to become a topic of growing
importance. Since assets are matched against liabilities, and the Bank's principal liabilities
are current account deposits held by financial institutions at the Bank and banknotes,
determining the appropriate way to match assets and liabilities is an issue that involves some
complexities and will be examined.

This does not necessarily mean that the overall balance sheet ought to be reduced to levels
prior to the Bank's implementation of unprecedented monetary easing. In the wake of the
2008 Global Financial Crisis, it is possible that demand for central bank reserves has been
changing, mainly due to the tightening of international liquidity regulations and the
strengthening of risk management by financial institutions. Taking this possibility into
account, the Bank will ascertain what the appropriate size of its balance sheet is.

Thank you.

Economic Activity, Prices,
and Monetary Policy in Japan
Speech at a Meeting with Local Leaders in Fukui
September 10, 2026
MASU Kazuyuki
Member of the Policy Board
Bank of Japan
Energy Situation in Japan
Chart 1
Note: Figures in the left panel are adjusted for fluctuations in the U.S. dollar/yen exchange rate. Figures in the right pie graph are for fiscal
2024.
Sources: Agency for Natural Resources and Energy; Ministry of Finance; Bank of Japan.
Crude Oil and LNG Prices
Japan's Energy Mix
0
50
100
150
200
250
300
20
21
22
23
24
25
26
Crude oil import prices per unit (Trade Statistics)
LNG import prices per unit (Trade Statistics)
Jan. 2020=100
CY
Natural gas
Coal
Oil
Solar
Nuclear
Hydroelectric
Biomass
Wind
Geothermal

Price Developments
Chart 2
Note: Figures in the left panel show the CPI for all items less fresh food.
Sources: Ministry of Internal Affairs and Communications; Bank of Japan.
Services Producer Prices
Corporate Goods Prices
Consumer Prices
-3
-2
-1
0
1
2
3
4
5
6
16
18
20
22
24
26
y/y % chg.
CY
-6
-4
-2
0
2
4
6
8
10
12
16
18
20
22
24
26
y/y % chg.
CY
-3
-2
-1
0
1
2
3
4
5
6
16
18
20
22
24
26
y/y % chg.
CY
Real Wages
Source: Ministry of Health, Labour and Welfare.
Wages
Chart 3
Scheduled Cash Earnings
-5
-4
-3
-2
-1
0
1
2
3
4
5
20
21
22
23
24
25
26
y/y % chg.
CY
-5
-4
-3
-2
-1
0
1
2
3
4
5
20
21
22
23
24
25
26
y/y % chg.
CY

Number of Employed Persons
by Prefecture
Notes: 1. In the left panel, figures are 4-quarter backward moving averages. Labor input is calculated by multiplying the number of employed
persons and working hours.
2. In the right panel, the shaded area shows the range between the highest and lowest growth rates in the number of employed persons
calculated for each prefecture.
Source: Ministry of Internal Affairs and Communications.
Employment
Chart 4
Labor Input
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
22
23
24
25
26
Number of employed persons
Working hours
Labor input
cumulative chg. from 2022/Q1, %
CY
80
85
90
95
100
105
110
115
120
125
130
11
13
15
17
19
21
23
25
CY 2011=100
Highest growth rate
Lowest growth rate
CY
National average
Gasoline Prices
Notes: 1. In the left panel, figures are weighted averages of the following items in the SPPI: motor freight transportation (agriculture, forestry
& fishery and food products), motor freight transportation (mineral and chemical products), motor freight transportation (metal and
machinery products), and motor freight transportation (light and miscellaneous industrial products).
2. In the right panel, figures are the retail prices of regular gasoline.
Sources: Agency for Natural Resources and Energy; Bank of Japan.
Distribution Costs
Chart 5
Motor Freight Transportation Costs
-2
-1
0
1
2
3
4
5
6
7
20
21
22
23
24
25
26
y/y % chg.
CY
100
110
120
130
140
150
160
170
180
190
200
20
21
22
23
24
25
26
yen/liter
CY

Note: "Rice-related items" consists of non-glutinous rice, mochi or rice cakes, daifukumochi or rice cakes stuffed with sweetened bean jam,
sembei or Japanese crackers, sushi (box lunches), box lunches, rice balls, frozen cooked rice, and aseptic packaged cooked rice.
Source: Ministry of Internal Affairs and Communications.
Contribution to CPI
CPI Inflation
Chart 6
Food, Goods, and Services
-3
-2
-1
0
1
2
3
4
5
23
24
25
26
Services
Goods (less food and energy)
Rice-related items
Food (less fresh food and rice-related items)
Fresh food
Energy
All items
y/y % chg.
CY
-5
0
5
10
15
20
25
30
35
40
21
22
23
24
25
26
Rice-related items
Food (less fresh food and rice-related items)
Goods (less food and energy)
Services
y/y % chg.
CY
Note: Figures for real interest rates are calculated by deducting inflation expectations from JGB yields for each maturity. Figures for inflation
expectations are based on Bank staff calculations using the expectations of various economic entities (firms, households, and experts) at
different horizons. Specifically, data used in the calculations are as follows: for firms, the Tankan; for households, the Opinion Survey
on the General Public's Views and Behavior; for experts, the QUICK Survey, the Consensus Forecasts, and inflation swap rates.
Sources: Bloomberg; Consensus Economics Inc., Consensus Forecasts; QUICK, QUICK Monthly Market Survey <Bonds>; Bank of Japan.
(Real interest rate = Nominal interest rate – Inflation rate)
Real Interest Rate
Chart 7
10-Year
1-Year
-3
-2
-1
0
1
2
10
12
14
16
18
20
22
24
26
%
CY
-3
-2
-1
0
1
2
10
12
14
16
18
20
22
24
26
%
CY

Range of Neutral Interest Rate and
Policy Interest Rates of Major Central Banks
Notes: 1. In the left panel, estimates are based on Bank staff calculations using the models proposed in the different papers listed. The shaded area
shows the estimated range of the natural rate of interest.
2. In the right panel, as the Federal Reserve does not officially publish the range of the neutral interest rate, the range for the United States is
based on the FOMC members' longer-run projections for the federal funds rate in the Summary of Economic Projections released after
the June 2026 FOMC meeting. The estimated range of the neutral interest rate for the euro area refers to the figures mentioned in a
recent speech by Philip R. Lane, a member of the Executive Board of the ECB.
Sources: Bloomberg; Cabinet Office; Consensus Economics Inc., Consensus Forecasts; ECB; Federal Reserve; Ministry of Finance; Ministry of
Health, Labour and Welfare; Ministry of Internal Affairs and Communications; Bank of Japan.
Natural Rate of Interest in Japan
Natural Rate of Interest, Neutral Interest Rate,
and Policy Interest Rates
Chart 8
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
Japan
United States
Euro area
Range of neutral interest rate
Policy interest rate
%
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
10
12
14
16
18
20
22
24
Holston, Laubach, Williams (2023)
Nakajima et al. (2023)
Imakubo, Kojima, Nakajima (2015)
Okazaki, Sudo (2018)
Del Negro et al. (2017)
Goy, Iwasaki (2024)
%
CY
Note: Inflation rates are calculated based on consumer prices for all items. The policy interest rate for the United States is the upper limit of
the federal funds target range. The rate for the euro area is the ECB deposit facility rate.
Sources: Haver; Ministry of Internal Affairs and Communications.
United States
Inflation Rates
Chart 9
Euro Area
Japan
-2
0
2
4
6
8
10
12
15
17
19
21
23
25
CPI
Mar. 2024
Termination of the negative interest rate policy
Inflation rate: 2.7%
y/y % chg.
CY
-2
0
2
4
6
8
10
12
15
17
19
21
23
25
PCE deflator
Mar. 2022
Rate hike: 0.25%→0.5%
Inflation rate: 6.9%
y/y % chg.
CY
-2
0
2
4
6
8
10
12
15
17
19
21
23
25
HICP
July 2022
Rate hike: -0.5%→0%
Inflation rate: 8.9%
y/y % chg.
CY

Amounts Outstanding of CP, Corporate Bonds,
and Bank Lending
Chart 10
Note: Figures in the left panel are as of the end of the period. Figures in the right panel are monthly averages.
Sources: I-N Information Systems; Japan Securities Dealers Association; Japan Securities Depository Center; Bank of Japan.
CP and Corporate Bonds
Lending by Domestic Commercial Banks
0
100
200
300
400
500
600
700
10
12
14
16
18
20
22
24
26
tril. yen
CY
0
20
40
60
80
100
120
140
160
10
12
14
16
18
20
22
24
26
tril. yen
CY
Households' Balance Sheets
Chart 11
Notes: 1. In the left panel, figures are as of the end of March 2026. The figure for equity and investment fund shares is the amount outstanding
of equity and investment trust beneficiary certificates (based on market values).
2. In the right panel, figures show the average balance sheet per household for each age group as of 2019.
Sources: Ministry of Internal Affairs and Communications; Bank of Japan.
By Age of Household Head
Total Amount
-15
-10
-5
0
5
10
15
20
25
30
Under 30
30s
40s
50s
60 and over
Ordinary deposits
Time deposits
Public and corporate bonds
Stocks etc.
Other financial assets
Housing loans
Other loans
Net financial assets
mil. yen
Assets
Liabilities
Ordinary deposits
Housing loans
Time deposits
Consumer
credit
Other deposits
and currency
Other liabilities
Equity and
investment fund
shares
Insurance and
pensions, etc.
Other assets
0
500
1,000
1,500
2,000
2,500
Assets
Liabilities
tril. yen

Underlying Inflation (1)
Chart 12
CPI Excluding Institutional Factors
Trimmed Mean etc.
Note: Institutional factors include the effects of the consumption tax hike, policies concerning the provision of free education, measures to
reduce the energy cost burden (such as gasoline prices, electricity charges, and gas charges), the reduction in mobile phone charges in
2021, and travel subsidy programs. Figures are Bank staff estimates.
Sources: Bank of Japan; etc.
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
15
17
19
21
23
25
Trimmed mean
Weighted median
Mode
y/y % chg.
CY
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
16
18
20
22
24
26
CPI (excluding fresh food and institutional factors)
CPI (excluding fresh food, energy, and institutional factors)
CPI (excluding food, energy, and institutional factors)
y/y % chg.
CY
Underlying Inflation (2)
Chart 13
Inflation Expectations
Trend Inflation
Notes: 1. In the left panel, "Economists 1" shows the forecasts of economists in the Consensus Forecasts. "Economists 2" shows the forecasts
of forecasters surveyed for the ESP Forecast. Figures for households are from the Opinion Survey on the General Public's Views
and Behavior, estimated using the modified Carlson-Parkin method for 5-choice questions. Figures for firms show the inflation
outlook of enterprises for general prices (all industries and enterprises, average) in the Tankan.
2. In the middle panel, composite indexes of inflation expectations are for 10-year-ahead expectations. They are calculated using
principal component analysis (PCA).
Sources: Bloomberg; Cabinet Office; Consensus Economics Inc., Consensus Forecasts; Google Trends; JCER, ESP Forecast; Ministry of
Health, Labour and Welfare; Ministry of Internal Affairs and Communications; QUICK, QUICK Monthly Market Survey <Bonds>;
Bank of Japan.
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
13
15
17
19
21
23
25
y/y % chg.
CY
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
13
15
17
19
21
23
25
%
CY
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
13
15
17
19
21
23
25
Model 1: Phillips curve model
(time-varying intercept)
Model 2: Time-varying
parameter VAR model
Model 3: Semi-structural
model
Model 4: Trend-cycle
decomposition model
%
CY
Market participants (QUICK, 2 to 10 years ahead)
Economists 1 (6 to 10 years ahead)
Economists 2 (7 to 11 years ahead)
Households (over the next 5 years)
Firms (5 years ahead)
Composite index of inflation expectations (PCA[i])
Composite index of inflation expectations (PCA[ii])
Break-even inflation (BEI) rate: yield spread between fixed-rate coupon-bearing JGBs (10-year) and inflation-indexed JGBs (10-year)

Policy Interest Rate
Note: Figures are the uncollateralized overnight call rate.
Source: Bank of Japan.
Chart 14
-0.5
0.0
0.5
1.0
1.5
08
10
12
14
16
18
20
22
24
26
%
CY
JGBs
ETFs
The Bank's Balance Sheet
Source: Bank of Japan.
Chart 15
-1
0
1
2
3
4
5
6
7
8
0
5
10
15
20
25
30
35
40
45
11
13
15
17
19
21
23
25
Amount of holdings (left scale)
Annual change (right scale)
tril. yen
CY
tril. yen
-60
-40
-20
0
20
40
60
80
100
0
100
200
300
400
500
600
700
800
11
13
15
17
19
21
23
25
Amount of holdings (left scale)
Annual change (right scale)
tril. yen
CY
tril. yen