Goldman Sachs on BoJ Upcoming Rate Decision - FJElite

Over the past two years, the BOJ has maintained a moderate pace of rate hikes of roughly once every six months. This is quite moderate compared with that of other central banks, and with the core CPI inflation rate having risen to the 3% level during this time, it has been widely noted that this could lead to an inflation overshoot (Le., the BOJ falling “behind the curve”).

In response, the BOJ has maintained a cautious stance toward rapid rate hikes, stating that current inflation is temporary owing to factors such as higher import prices, and that the longer-term underlying trend is still a little below 2% (e.g., Committee on Financial Affairs, the Upper House, June 3,2025). That said, since the start of this year, the BOJ has changed its assessment of the underlying inflation rate. After stating in the April 2026 Outlook Report that “...underlying CPI inflation [is] approaching 2 percent...” (Exhibit 1)1. the June 2026 statement mentioned the risk of underlying inflation exceeding 2%. This was repeated in the July Outlook Report.