Economic Activity, Prices,
and Monetary Policy in Japan
Speech at a Meeting with Local Leaders in Kagawa
ADACHI Seiji
Member of the Policy Board
I. Economic Activity and Prices
A. Economic Activity
I would like to start my speech by talking about the current situation of Japan's economy.
In my view, while conditions in Japan's economy cannot be regarded as favorable, the
economy has been resilient on the whole. To examine this point in detail, let me describe
Japan's economic situation from two aspects: the household sector and the corporate sector.
I will start with the household sector. There have been comments that private consumption
remains somewhat lackluster (Chart 1). That said, I believe that this can mostly be attributed
to weakness in durable goods consumption, which reflects setbacks in automobile production
caused by various unexpected incidents. Disregarding this as a temporary factor, I consider
that private consumption has generally been following the projected trend. Indeed, in
response to price rises, households' thriftiness has intensified in the consumption of food and
daily necessities in particular, which resulted in consumption of nondurable goods being on
a decreasing trend; for example, some anecdotal information from supermarkets and other
stores indicates that household demand has been shifting to lower-priced private-label
products. On the other hand, however, services consumption has been viewed as being solid,
and business performance in the foodservice industry has been favorable.
What is particularly interesting is that, amid the continued decline in real wages and the
resulting severe income conditions, households have been managing by cutting back on
fundamental expenditures, rather than by reducing their selective expenditures. This implies
that households are starting to change their spending patterns, becoming more selective in
their consumption -- that is, they actively spend on goods or services that they place priority
on, while cutting back on other spending, depending on their respective circumstances. In
response to these changes in household spending patterns, firms are also diversifying the sales
strategies for their products and services, thereby expanding the selling price range. In other
words, while Japan's economy has been subdued in some respects because of higher prices,
this situation seems to be generating room for households and firms to harness their creativity
in their day-to-day activities. In this sense, it is possible to argue that the economy is in a way
heading toward normalization.
Next, I will turn to the corporate sector. While production, exports, and business fixed
investment have been solid, I have the impression that they are somewhat lacking in
momentum. Starting with business fixed investment, the Bank of Japan's September 2024
Tankan (Short-Term Economic Survey of Enterprises in Japan) shows firms' appetite for such
investment remains strong; however, actual results suggest that fixed investment conditions
have been mixed (Charts 2 and 3). In terms of specific business fixed investment projects,
there has been a wide variety, including (1) those associated with manufacturers' moves to
transfer their overseas production sites back home, reflecting the yen's depreciation and
heightened concerns over economic security; (2) investment in urban redevelopment projects;
and (3) climate change-related investment. Moreover, given the historically low levels of real
interest rates and the favorable business fixed investment environment that reflects strong
business performance and steady stock prices, firms' fixed investment should increase further.
Why then have some firms been reluctant to make fixed investments? I would like to point
out two contributing factors. First is the bottleneck in human resources; there have been
shortages of technical experts and the labor necessary for setting up facilities or constructing
factories, stores, and other premises. This factor has also likely affected firms' production
activity. That is, anecdotal information suggests that, due to severe labor shortages, firms have
inevitably had to pursue business realignment and integration through such means as shifting
production sites of unprofitable businesses to emerging economies with lower labor costs, or
engaging in business restructuring by selling unproductive businesses to other firms,
including foreign firms. In my view, this has resulted in the production index remaining below
the pre-pandemic level.
The second reason why firms have been reluctant to make fixed investment is high
uncertainties regarding the outlook. For instance, firms' inflation outlook for general prices
for five years ahead, as presented in the September 2024 Tankan, shows that over 40 percent
of firms responded that they "do not have clear views" on general prices because of high
uncertainties over the outlook (Chart 4). This figure is considerably higher than past results.
Setting selling prices is one of the vital elements of a firm's business strategy. As is the case
with general prices, if the future course of selling prices remains unpredictable, this also holds
true for the outlook for corporate profits. In such a situation, firms are probably hesitant to
make fixed investment as this will inevitably weigh on them as a significant source of fixed
costs.
Let me now move on to exports. Despite the continuing depreciation of the yen, exports have
shown mixed developments, affected by a lack of momentum in the Chinese and European
economies (Chart 5). Rather than being affected by the price factor (the weaker yen), Japan's
exports have been greatly influenced by the quantitative factor (overseas demand), which is
determined by developments in the global economy. Global economic developments will
therefore have to be taken into account when considering future developments in exports, as
these, for the time being, entail uncertainties that should not be overlooked. U.S. economic
policy may change drastically, depending not only on the outcome of the U.S. presidential
election in November, but also on how the results of the concurrent Congressional elections
affect the balance of power between the parties in the two houses of Congress. There may
also be a substantial change in geopolitical risks. Since developments in the international
situation just mentioned entail the possibility of triggering a significant change in Japan's
corporate behavior, these developments warrant greater attention.
B. Price Developments in Japan
1. Price situation
I will now talk about price developments in Japan.
Looking at recent price developments, it can be said that prices have thus far been on track,
as the virtuous cycle between wages and prices has finally begun to operate. In other words,
prices seem to be steadily following the path expected by the Bank toward achievement of 2
percent underlying inflation. However, there now seem to be points that warrant some
attention, although they do not yet suggest a need to change the Bank's outlook.
Let me now share my view on prices. When examining price developments, I always adopt a
method of separating the categories in the consumer price index (CPI) into two: "sticky"
consumer prices, mainly composed of services prices for which the price changes relatively
infrequently; and "flexible" consumer prices, mainly composed of goods prices for which the
price changes relatively frequently.1 Sticky consumer prices are significantly affected by
wage developments, whereas flexible consumer prices are considerably affected by
developments in yen-denominated import prices.
Based on this categorization, I would like to briefly outline developments in the CPI to date.
The rate of increase in flexible consumer prices has decelerated considerably, mainly due to
a pause in the rise in international commodity prices. On the other hand, sticky consumer
prices have been rising in reflection of higher personnel expenses, but the pace of the rise has
remained only moderate. As a result, the CPI inflation rate has followed a declining trend
(Chart 6).2 Latest developments suggest that sticky consumer prices are finally starting to
rise, reflecting to some degree the results of the 2024 annual spring labor-management wage
negotiations; what is more, the slowdown in flexible consumer prices has shown signs of
rebound due to the effects of the yen's depreciation.
Given a projected faster rise in both sticky and flexible consumer prices, upside risks to prices
have increased. In light of this, at the July 2024 Monetary Policy Meeting (MPM), the Bank
considered it appropriate to adjust the degree of monetary accommodation from the
perspective of sustainable and stable achievement of the price stability target of 2 percent and
decided to raise the policy interest rate.
2. Points to note in examining future price developments
Still, I believe that future price developments in Japan will continue to warrant some attention
for the following reasons.
The first is the possibility that the yen's depreciation will be retraced with greater momentum.
In particular, if U.S. monetary policy enters a full-fledged rate-cutting cycle, this may result
in an intensified retracement of the yen's depreciation against the U.S. dollar. This could
become a factor driving down import prices with a time lag and, as a result, put downward
pressure on flexible consumer prices, chiefly composed of goods prices.
The second reason is that, because I take a somewhat cautious view about whether sufficient
wage hikes will be sustained in 2025, I think it is necessary to adequately examine these
developments. According to the final aggregate results of the 2024 annual spring labor-
management wage negotiations compiled by the Japanese Trade Union Confederation
(Rengo), the rate of increase in wages (including seniority- and performance-related wages)
was 5.10 percent, significantly higher than expected. Moreover, the Financial Statements
Statistics of Corporations by Industry, Quarterly for the April-June quarter of 2024, which
has a wider sample coverage, showed that the year-on-year rate of increase in personnel
expenses was 4.8 percent, for all industries and enterprises excluding the finance and
insurance industries. The rate was also up 6.7 percent on the same basis for enterprises with
capital of 10 million yen or more but less than 100 million yen, which are assumed to be
mainly small enterprises.
As just outlined, this year indeed saw significant wage increases. At the same time, in the
Financial Statements Statistics of Corporations by Industry, Quarterly for the April-June
quarter, current profits for all industries and enterprises excluding the finance and insurance
industries were up 13.2 percent year on year, which means that firms are earning profits far
in excess of their wage hikes. In other words, wage hikes are limited within the scope of
growth in business earnings and, as a result, labor share is still on the decline (left panel of
Chart 7).
When comparing developments in labor share and wage increases, the two are generally
negatively correlated. However, even since the exit from deflation, starting in 2013, the pace
of wage hikes has trailed far behind the pace of decline in labor share (left and right panels
of Chart 7). Moreover, although the ratio of personnel expenses to sales is no longer declining,
with almost no difference between manufacturers and nonmanufacturers or between
enterprise sizes, this is not a major departure from past trends (Chart 8). This implies that the
significant wage increases in the 2024 spring negotiations were by no means a generous
allowance on the part of firms, at least from a macroeconomic perspective. Rather, these
increases, for the most part, are a reflection of favorable business performance, suggesting
that firms have not necessarily made a clear shift in their stance toward raising wages from
that of the deflationary period.
To avoid any misunderstanding, let me stress that I certainly do not mean that the wage hikes
by firms are inadequate. If firms implement unreasonable wage hikes that outpace growth in
their business earnings, and labor share consequently rises, this could trigger a drop in stock
prices, given the past relationship between labor share and stock prices. Because
developments in stock prices affect factors such as firms' fixed investment stance,
unreasonable wage hikes could end up in an economic downturn. Put differently, wage hikes
from 2025 onward will ultimately depend on firms' business performance and, in turn,
economic conditions. Given the high degree of the uncertainties that I mentioned earlier,
mainly concerning the international situation, how wage hikes will play out next year remains
very unclear. I therefore think it is necessary to carefully examine their developments.
There is absolutely no need for pessimism, though. The ratio of break-even point to sales,
calculated from the Financial Statements Statistics of Corporations by Industry, Annually has
come down significantly (Chart 9). This shows that firms' earning power has been boosted
substantially, and that they are making headway in improving their fundamental business
structure to achieve higher profitability. In other words, firms' fundamental business structure
has become more conducive to wage hikes, in line with the improvement in their earning
power.
Given these factors, the extent of wage hikes in 2025 will ultimately be determined by
business performance in fiscal 2024, which in turn depends on whether there will be greater
room for expansion in external demand and business fixed investment.
II. Conduct of Monetary Policy
Steps toward Normalizing Monetary Policy
So far, I have talked about Japan's economic and price developments. I would now like to
move on to explaining the Bank's current conduct of monetary policy and share my thoughts
on the Bank's policy stance after the termination of the negative interest rate policy and yield
curve control.
With respect to the current conduct of monetary policy, the Bank decided at the March 2024
MPM to (1) terminate the negative interest rate policy and yield curve control, and (2) shift
to a framework in which it conducts monetary policy by guiding the short-term interest rate,
the uncollateralized overnight call rate, as a primary policy tool. Subsequently, at the July
MPM, the Bank decided to raise the uncollateralized overnight call rate by 0.15 percentage
points, encouraging it to remain at around 0.25 percent. It also decided on a plan to gradually
reduce its monthly purchase amount of Japanese government bonds (JGBs) so that it will be
about 3 trillion yen in January-March 2026 (Charts 10 and 11). With these measures, the Bank
is proceeding with efforts to normalize monetary policy, aiming to achieve the price stability
target of 2 percent in a sustainable and stable manner.
It seems to me that some people may have doubts about the current conduct of monetary
policy, as to whether the Bank was premature in entering into a normalization process of
gradually raising its policy interest rate, and as to whether this step runs the risk of Japan
falling back into deflation. I would therefore like to share my thoughts on both of these points.
To come straight to the point, I believe Japan's economy has already met the conditions
needed for monetary policy to initiate normalization. As experience suggests, I believe the
key conditions are that (1) the distribution of the year-on-year rate of change in the price of
individual items constituting the CPI no longer has the shape typical of a deflationary period,
and (2) the level of CPI inflation has surpassed its pre-deflation peak. Indeed, these conditions
have already been fulfilled (Chart 12). Another essential condition in proceeding with
normalization is to avoid any drastic policy changes that could raise concern over the risk of
a fall back into deflation.3 In fact, as I will next discuss, this condition is precisely why I
think it is appropriate to undertake gradual hikes in the policy interest rate in normalizing
monetary policy.
I would like to note one point that warrants caution when raising the policy interest rate in a
gradual manner: until the underlying inflation rate achieves the target of 2 percent in a
sustainable and stable manner, the Bank will raise the policy interest rate at an extremely
moderate pace while basically maintaining accommodative financial conditions. The Bank
needs to raise the policy rate before the sustainable and stable achievement of 2 percent
underlying inflation, as rapid hikes in the policy rate after the achievement of the target could
cause a major shock to the real economy. It is difficult to estimate in advance the extent of
the shock such a rapid rate hike would cause. However, if, for example, the Bank maintains
a zero interest rate until underlying inflation remains stable near the target of 2 percent,
followed by discontinuous and sudden policy rate hikes once the target has been achieved,
the risk of this causing an economic slowdown cannot be overlooked, as the slowdown could
once again induce a shift to a deflationary regime that will heighten concern over deflation.
To avoid such a scenario, gradual policy rate hikes -- that make sure the extent of the hike is
kept within a range that will not cause a shock to the real economy -- should more likely allow
for a smoother monetary policy normalization. This can be viewed as a form of risk
management in monetary policy conduct.
The most critical point to keep in mind when proceeding with monetary policy normalization
is to maintain accommodative financial conditions while gradually raising the policy interest
rate. What is meant by accommodative financial conditions here is a situation where the real
policy interest rate is below the natural rate of interest.
The key here is the level of the natural rate of interest. The natural interest rate has been an
important topic of discussion in considering recent conduct of monetary policy. Unfortunately,
at least for now, it is difficult to empirically identify a reliable figure for the natural interest
rate. The Bank uses a variety of methods to measure this rate, but since the figures -- as of
the first quarter of 2023 -- range widely from around minus 1 percent to around plus 0.5
percent, depending on the methods employed, these are merely estimates.4 I personally
consider it reasonable to assume the lowest figure, since I believe that there is no need at this
point to undertake rapid policy rate hikes to curb inflation, and that hasty policy rate hikes
should rather be avoided. Even with this assumption, the current real policy interest rate is
well below the natural interest rate, suggesting that accommodative financial conditions have
been maintained.
If underlying inflation becomes increasingly likely to surpass 2 percent once the target of 2
percent has been achieved in a sustainable and stable manner, the Bank will, to curb inflation,
raise the policy rate at a faster pace than the inflation rate. Moreover, when the inflation rate
remains at around 2 percent in a sustainable and stable manner, it can be assumed that the
policy rate at the time is roughly on a par with the level of the neutral interest rate. In this
case, the Bank will conduct monetary policy with an eye to maintaining the policy rate at that
neutral level.
Let me repeat that, when the price stability target is achieved by realizing 2 percent underlying
inflation in a sustainable and stable manner, the level of the policy rate can be said to be
broadly equivalent to that of the neutral interest rate. To be honest, though, given the
uncertainties we may face down the road, it is difficult at this point to project the specific
level of the neutral interest rate and the timing of the policy rate approaching that level.
Academic and central bank researchers have published a wealth of papers investigating the
factors that determine the levels of both the neutral and natural interest rates.5 These have
pointed to a variety of determinants; however, one of the strongest determining factors is a
country's potential growth rate, and this suggests that demographics and the growth rate of
technology hold the key. The savings-investment balance and the level of long-term interest
rates are also considered to be determinants. While it is important to continue efforts to refine
the estimation method for the natural interest rate, I believe it is also vital to engage in further
discussion, including with regard to a qualitative assessment of the individual factors
determining the natural interest rate.
Thank you.
Economic Activity, Prices,
and Monetary Policy in Japan
Speech at a Meeting with Local Leaders in Kagawa
October 16, 2024
ADACHI Seiji
Member of the Policy Board
Bank of Japan
Chart 1
Consumption Activity Index (CAI, Real)
CAI (Travel Balance Adjusted) CAI by Type
s.a., CY 2015=100
s.a., 2019/Q1=100 s.a., 2019/Q1=100
120 115 115
Nondurable goods
110 <40.5> 110
115
Services <50.7>
105 105
110
100 100
105
95 95
100
90 90
95
85 85
90
80 80
85
75 75
Durable goods <8.9>
80 70 70
CY 14 15 16 17 18 19 20 21 22 23 24 CY 19 20 21 22 23 24 19 20 21 22 23 24
Chart 2
Developments in Business Fixed Investment Plans
y/y % chg.
18
FY2024
15
12
9
6
3
Average (FY2004-2023)
0
FY2020
-3
FY2021
FY2022
-6
FY2023
-9
Mar. June Sept. Dec. Forecast Actual
Notes: 1. Based on the Tankan. All industries including financial institutions.
2. Figures include software and R&D investments but exclude land purchasing expenses. R&D investment is not covered
as a survey item before the March 2017 survey.
3. There are discontinuities in the data for December 2021 and December 2023 due to changes in the survey sample.
Source: Bank of Japan.
Chart 3
Business Fixed Investment
Coincident Indicators of Leading Indicators of
Business Fixed Investment Business Fixed Investment
s.a., ann., tril. yen s.a., CY 2020=100 s.a., ann., tril. yen
95 130 13
Machinery orders (private sector, excluding
volatile orders)
12
120
90 Construction starts (private, nonresidential,
estimated construction costs)
11
110
85
10
100
9
80
90
8
Private nonresidential investment
75
(SNA, real, left scale)
80
7
Domestic shipments and imports of
capital goods (right scale)
70
70
6
Private construction completed
(nonresidential, real, right scale)
5
65 60
09 11 13 15 17 19 21 23
CY
09 11 13 15 17 19 21 23
CY
Notes: 1. The figure for domestic shipments and imports of capital goods
Notes: 1. Volatile orders are orders for ships and those from electric power
for 2024/3Q is the July-August average. The figure for private
companies.
construction completed for 2024/3Q is for July.
2. The figure for machinery orders for 2024/3Q is for July. The
2. Figures for real private construction completed are based on
figure for construction starts for 2024/3Q is the July-August average.
Bank staff calculations using the construction cost deflators. Sources: Cabinet Office; Ministry of Land, Infrastructure, Transport and
Sources: Cabinet Office; Ministry of Economy, Trade and Industry;
Tourism.
Ministry of Land, Infrastructure, Transport and Tourism.
Chart 4
Firms' Inflation Outlook for General Prices
share of firms, %
50
45
40
35
30
CY
14 15 16 17 18 19 20 21 22 23 24
Notes: 1. Figures show the share of firms having no clear views on general prices due to high uncertainty over the outlook, based on the
inflation outlook for general prices (all industries and enterprises, 5 years ahead) in the Tankan.
2. Specifically, when asked about their inflation outlook, firms are those that selected "Uncertainty" among firms responding that
they "do not have clear views" on general prices in the Tankan.
Source: Bank of Japan.
Chart 5
Exports
Total Real Exports Real Exports by Region
s.a., 2019/Q1=100 s.a., 2019/Q1=100
s.a., CY 2020=100
120 130 130
120 120
110
110 110
100 100
100
90 90
80 80
90
70 70
80
60 60
China <17.6>
50 NIEs, ASEAN, etc. 50
United States <20.1>
70
<34.4>
Other economies <17.6>
40 40
EU <10.3>
30
60 30
CY 19 20 21 22 23 24
CY 09 11 13 15 17 19 21 23 19 20 21 22 23 24
Notes: 1. Based on Bank staff calculations.
2. Figures for 2024/Q3 are July-August averages.
3. In the right panel, figures in angle brackets show the share of each country or region in Japan's total exports in 2023.
Figures for the EU exclude those for the United Kingdom for the entire period.
Sources: Ministry of Finance; Bank of Japan.
Chart 6
CPI (Excluding Temporary Factors)
y/y % chg.
4.5
Goods
4.0
General services (less
3.5
housing rent)
Housing rent (private and
3.0
imputed rent)
Administered prices
2.5
2.0 CPI (less fresh food and
energy)
1.5
1.0
0.5
0.0
-0.5
CY 19 20 21 22 23 24
Notes: 1. Administered prices exclude energy prices and consist of public services and water charges.
2. The CPI figures are Bank staff estimates and exclude mobile phone charges and the effects of the consumption tax hike,
free education policies, and travel subsidy programs.
Source: Ministry of Internal Affairs and Communications.
Chart 7
Developments in Labor Share and Wage Increases
Personnel Expenses
Labor Share
y/y % chg.
4-quarter backward moving avg., %
15
80
75
10
70
5
65
0
60
-5
55
50
-10
CY 91 94 97 00 03 06 09 12 15 18 21 24
CY 91 94 97 00 03 06 09 12 15 18 21 24
Notes: 1. Based on the Financial Statements Statistics of Corporations by Industry,
Note: Based on the Financial Statements Statistics of Corporations by Industry,
Quarterly. Excluding the finance and insurance industries.
Quarterly. Excluding the finance and insurance industries.
2. Labor share = personnel expenses / value-added. Value-added =
Source: Ministry of Finance.
operating profits + personnel expenses + depreciation expenses.
Source: Ministry of Finance.
Chart 8
Ratio of Personnel Expenses to Sales
By Size (All Industries Excluding
By Industry (Enterprises of All Sizes)
Finance and Insurance)
%
%
25.0
25.0
Manufacturing
Non-manufacturing
20.0
20.0
15.0
15.0
10.0
10.0
Large enterprises
5.0
5.0
Medium-sized enterprises
Small enterprises
0.0
0.0
07 09 11 13 15 17 19 21 23
FY FY 07 09 11 13 15 17 19 21 23
Notes: 1. Based on the Financial Statements Statistics of Corporations by Industry, Annually. Excluding the finance and insurance industries.
2. Personnel expenses = directors' remuneration + bonus for directors + salaries and wages + bonus for employees + welfare expenses
3. In the right panel, large enterprises are those with capital of 1 billion yen or more, medium-sized enterprises are those with capital of 100 million
yen or more but less than 1 billion yen, and small enterprises are those with capital of less than 100 million yen.
Source: Ministry of Finance.
Chart 9
Break-Even Ratio
%
100
90
80
70
60
50
FY
07 09 11 13 15 17 19 21 23
Notes: 1. Based on the Financial Statements Statistics of Corporations by Industry, Annually. Excluding the finance and insurance industries.
Enterprises of all sizes.
2. Break-even ratio = break-even sales / sales. Break-even sales = fixed costs / marginal profit ratio. Fixed costs = personnel expenses +
interest expenses, etc. + depreciation expenses + rent on movable property and real estate. Personnel expenses = directors' remuneration +
bonus for directors + salaries and wages + bonus for employees + welfare expenses. Marginal profit ratio = (sales - variable costs) / sales.
Variable costs = sales - fixed costs - current profits.
Source: Ministry of Finance.
Chart 10
Decisions at the July 2024 MPM (1): Change in the Guideline for Money Market Operations

Japan's economic activity and prices have been developing generally in line with the Bank's outlook. Moves
to raise wages have been spreading.
 The year-on-year rate of change in import prices has turned positive again, and
upside risks to prices require
attention.
Medians of the Policy Board members' forecasts (y/y % chg.) Risk balance assessments on prices
Fiscal Fiscal Fiscal
Fiscal 2024 Fiscal 2025 Fiscal 2026
2024 2025 2026
― ―
Real GDP (-0.2) ( ) ( )
0.6 1.0 1.0
CPI (all items less fresh
(-0.3) (+0.2) ( ― )
2.5 2.1 1.9
food)
CPI (all items less Upside Upside Balanced
― ― ―
( ) ( ) ( )
1.9 1.9 2.1
fresh food and energy)
Note: Figures in parentheses indicate changes from the April Outlook Report.
Adjusting the degree of monetary accommodation from the perspective of
sustainable and stable achievement of the price stability target of 2 percent
Short-term interest rate : raised to "around 0.25%"
(uncollateralized overnight call rate)
(previously "around 0 to 0.1%")
 Real interest rates are expected to remain significantly negative, and accommodative financial conditions
will continue to
firmly support economic activity.

If the outlook presented in the July Outlook Report is realized, the Bank will accordingly continue to raise
the policy interest rate and adjust the degree of monetary accommodation.
Chart 11
Decisions at the July 2024 MPM (2): Plan for the Reduction of the Purchase Amount of JGBs
The concept of the plan for the reduction until March 2026
1. Long-term interest rates: to be formed in financial markets in principle
2. JGB purchases: appropriate for the Bank to reduce its purchase amount of JGBs in a predictable manner, while
allowing enough flexibility to support stability in the JGB markets
Reduction in a Predictable Manner
Amount of monthly JGB purchases The Bank's JGB holdings
tril. yen (approximate amount)
tril. yen
600
Interim assessment In principle, the Bank will
5.7
reduce the planned amount of
5.3
500
its monthly outright purchases
4.9
Roughly
of JGBs by about 400 billion yen
4.5
a 7-8%
4.1 each calendar quarter.
400
decrease
3.7
3.3
2.9
300
From April 2026
The Bank will discuss 200
a guideline in the
interim assessment
100
and announce the
results.
0
0
Oct Apr Oct Apr
Jul-24 Jan-25 Jul Jan-26 CY
13 14 15 16 17 18 19 20 21 22 23 24 25 26
Allowing Enough Flexibility
Chart 12
Conditions Required for Monetary Policy to Enter into a Normalization Process
CPI (Less Fresh Food and Energy)
CPI Price Change Distributions
share of the number of items, %
2020-Base Consumer Price Index
50 110
CY1991
45
CY1999
105
40
CY2012
35 Aug. 2024
100
30
25
95
20
90
15
10
85
5
0
0 2 4 6 8
-8 -6 -4 -2 80
10 10
less to to to to to
to
to to to CY 90 95 00 05 10 15 20
to
0 2 4 6
or -2
8
-8 -6 -4 than
-10
-10
more
y/y % chg.
Notes: 1. Figures are calculated using long-term time series data for each item Note: Figures are annual averages.
in Japan's CPI (2020-base). Source: Ministry of Internal Affairs and Communications.
2. Figures for CY1991, 1999, and 2012 are calculated using annual
average data.
Source: Ministry of Internal Affairs and Communications.