BOJ Keeps Key Interest Rate Unchanged. Ideas Later.

BOJ keeps key interest rate unchanged, lifts economic outlook for FY 2026

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TOKYO (Kyodo) -- The Bank of Japan on Friday kept its benchmark interest rate unchanged at around 1.0 percent after raising it to a 31-year-high last month while revising upwards its economic outlook for the current fiscal year, which started in April, despite ongoing Middle East tensions.

After a two-day policy meeting, the central bank said it will continue to raise the rate to stably achieve 2 percent inflation target, vowing to adjust the timing and pace by examining the Middle East development, expansion in artificial intelligence-related demand and the developments in foreign exchange rates.

In the latest quarterly economic outlook report, the central bank said it expects the Japanese economy to grow 0.6 percent in fiscal 2026, compared with its earlier projection of a 0.5 percent expansion.

While the U.S.-Iran conflict is expected to weigh on economic activity for fiscal 2026, the economy will be supported by factors such as the increase in global AI demand, the BOJ said.

For fiscal 2027, the central bank lifted the outlook to an expansion of 0.8 percent compared to 0.7 percent forecast earlier, noting that the negative effects of high crude oil prices will wane and that a "virtuous cycle from income to spending will gradually intensify."

Core consumer prices, excluding volatile fresh food, are estimated to rise 2.5 percent in fiscal 2026, against the 2.8 percent forecast in April.

With businesses continuing moves to pass on wage increases to sales prices, high crude oil prices and a weak yen, the bank said the consumer price index is likely to "accelerate to a level clearly above 2 percent from the second half of fiscal 2026."

"As for underlying CPI inflation, there is a risk that it will deviate upward to a level above the price stability target of 2 percent," it said in the report.

Of the nine Policy Board members, Hajime Takata voted against the action to keep the key short-term interest rate unchanged and called for a hike to around 1.25 percent, citing the need to respond to upside risks to prices.

Article source:  https://mainichi.jp/english/articles/20260731/p2g/00m/0bu/022000c

Japan Possible Cut in Food Tax: Ideas Later.

Japan PM Takaichi eyes cutting consumption tax on food to 1% from April

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TOKYO (Kyodo) -- Prime Minister Sanae Takaichi said Thursday that Japan will cut the consumption tax rate on food and beverages to 1 percent from the current 8 percent for two years starting next April, marking the first reduction since the system was introduced in 1989.

The tax cut will be coupled with cash handouts to low- and middle-income earners to "effectively reduce the tax burden to zero," which is "the best option" to support households struggling with higher prices, Takaichi told a press briefing at her office.

The plan was unveiled earlier in the day at a meeting of executives of the ruling Liberal Democratic Party led by Takaichi, who instructed senior LDP officials to secure the party's endorsement and pave the way for Cabinet approval by early next month.

Amid already high government bond yields and a weak yen, the tax cut could further fuel concerns over Japan's fiscal health, as the measure would create a gaping hole in social security funding, with the loss of tax revenues reaching about 10 trillion yen ($61 billion) over two years.

Takaichi, who is pursuing expansionary spending to spur economic growth, has yet to identify a specific revenue source to offset the tax cut, but told reporters the government will secure the necessary funds through fiscal "reforms" and "without (issuing) deficit-covering bonds."

Acknowledging that the consumption tax is a vital source of funding for social security, Takaichi said, "I will take full responsibility for restoring the tax rate to its original level two years after (implementing the cut) to ensure fiscal sustainability and maintain market confidence."

Takaichi's tenure as LDP head, however, will expire in fall 2027, meaning it is uncertain whether she will remain prime minister in spring 2029.

LDP Secretary General Shunichi Suzuki told reporters earlier Thursday that Takaichi explained her decision to party executives, who unanimously approved it. The party aims to have related bills approved during an extraordinary Diet session likely to be convened in the fall, he added.

The LDP's junior coalition ally, the Japan Innovation Party, also agreed to Takaichi's tax cut plan and will cooperate on it when the two parties' senior officials hold talks, JIP Secretary General Hiroshi Nakatsuka told reporters.

Meanwhile, some LDP members openly expressed their opposition. Former Foreign Minister Taro Kono told reporters that there is "no guarantee" the planned tax reduction will lead to lower food prices and that they could "spike significantly" when the tax rate is restored to its original level two years later.

Yuko Obuchi, former LDP election strategy chief, has resigned as a senior member of an informal meeting under the LDP's research commission on the tax system in protest at the tax cut plan, sources familiar with the matter said.

She is known for emphasizing fiscal discipline. Her father, the late Prime Minister Keizo Obuchi, served as chief Cabinet secretary under Prime Minister Noboru Takeshita, whose government introduced Japan's 3 percent consumption tax 37 years ago.

The LDP, led by Takaichi, scored a landslide victory in the House of Representatives election in February on pledges that included rapid consideration of slashing the consumption tax rate on food and beverage products to zero for two years. The JIP and many opposition parties made similar promises at that time amid elevated prices.

But the ruling parties decided to change course and seek a cut to 1 percent after learning at a cross-party meeting about taxation and social security that adjusting retailers' cash register systems to a zero rate would require more time.

To fulfill the campaign pledge of a zero tax, cash handouts to low- to middle-income households would total 600 billion yen annually, which is equivalent to the revenue from a 1 percent tax rate on food and beverage items.

With opposition parties arguing that a de facto tax rate hike eventually awaits the public because the cut is a temporary measure, the cross-party meeting, called the national council on social security, failed to reach a consensus following monthslong discussions, leaving it up to the prime minister to decide.

While Takaichi has vowed to reinstate the tax rate after two years, which may mean April 2029, it could become a politically risky move given that a House of Councillors election is slated for the summer of 2028.

The ruling bloc refers to the two-year tax cut scheme as a "transitional measure" until the new income-linked relief program for lower-income workers is introduced in fiscal 2029. The program was approved during the cross-party talks.

Japan's consumption tax rate has gradually increased, mainly to finance mounting social security costs as the population rapidly ages. The rate started at 3 percent, increased to 5 percent in 1997, and rose to 8 percent in 2014.

Since 2019, the rate has been set at 10 percent, but a reduced rate of 8 percent has been applied to food and beverage sales, excluding alcoholic beverages and dining out.

Article source:  https://mainichi.jp/english/articles/20260730/p2g/00m/0na/023000c

Japan Govt. GDP Growth Outlook: Ideas Later.

Gov't cuts Japan's FY 2026 GDP growth outlook to 0.9% on higher oil prices

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TOKYO (Kyodo) -- The Japanese government on Thursday cut its economic growth outlook to 0.9 percent for the current fiscal year from April, down from an earlier estimate of 1.3 percent as higher crude oil prices hit the import-reliant economy.

The Cabinet Office also unveiled its latest projections for the primary balance, a key indicator of a country's fiscal health, expecting a 1.4 trillion yen ($8.6 billion) surplus in fiscal 2027 on a boost in tax revenues, compared with last month's estimate of a deficit of 2.1 trillion yen.

The improved projections for the primary balance -- calculated by subtracting spending from tax and other revenues, excluding government bond interest payments -- come as financial markets remain concerned that Prime Minister Sanae Takaichi's push for aggressive spending to boost growth will further worsen the heavily indebted country's finances.

"In promoting the shift to responsible and proactive public finances, we will also secure confidence from the market by communicating with the market carefully with high transparency," Takaichi told the Council on Economic and Fiscal Policy at her office where the latest economic outlooks were presented.

A surplus in the primary balance -- meaning tax and other revenues exceed spending, excluding debt-servicing costs -- indicates the government can cover its expenses without new bond issuances.

Still, the Cabinet Office said in the report that it foresees a larger deficit of 1.2 trillion yen in fiscal 2026, up from the 800 billion yen deficit projected earlier, due to the need to finance a supplementary budget for the year.

In its midyear report, the government said that the weaker yen against the U.S. dollar and elevated oil prices resulting from the conflict in the Middle East pose risks to the Japanese economy, despite the fact that wage growth and a rise in personal consumption have been bolstered by government subsidies for energy costs.

The Cabinet Office's forecast said that the government expects the yen to trade at 161.4 against the U.S. dollar, which is much weaker than the projected 155.2 in January. The forecast also said that crude oil prices will rise to 92.5 dollars per barrel, surging from the previous estimate of 68 dollars.

Resource-poor Japan is vulnerable to rises in crude oil prices, while the weaker yen against the dollar contributes to raising import costs.

For the 2027 fiscal year starting next April, the government said GDP will expand 1.1 percent on the back of Takaichi's push for boosting investments in crisis management and strategic growth sectors -- a move that is expected to spur recovery in personal consumption and increase capital investments.

To promote public-private investments, the Takaichi Cabinet on Thursday approved guidelines for drafting the state budget for the year starting next April, featuring a newly created investment allotment for creating a "strong and prosperous Japan," under which ministries can make budget requests without upper limits.

The requests will be assessed in the budget-making process based on factors such as whether they will contribute to growth by generating investment returns. The process will also include a multiyear budget framework to enhance predictability for executions of the projects.

Finance Minister Satsuki Katayama said the officials could utilize sophisticated generative AI in their discussions, taking a different drafting approach from before.

Article source:    https://mainichi.jp/english/articles/20260730/p2g/00m/0bu/013000c

Japan Minimum Wage Hikes: Ideas Later.

Japan hikes FY2026 average minimum wage guideline by 4.9% to 1,176 yen

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TOKYO (Kyodo) -- An advisory panel to Japan's labor ministry decided Tuesday to raise the minimum wage guideline for fiscal 2026 by a nationwide average of 55 yen (34 cents), or 4.9 percent, to 1,176 yen per hour, amid rising living costs.

The increase fell short of the previous year's guideline hike of 63 yen, which was the largest since the current system began in fiscal 2002. The margin reflected the need both to alleviate the financial burden on workers hit by inflation and to give consideration to small and midsize firms' business conditions.

Minimum wages are revised every fiscal year. The government panel sets an annual guideline for minimum wages in each of Japan's 47 prefectures. Local panels then decide the specific rates for their respective areas, with the new wages typically taking effect from October onward.

If prefectures raise wages in line with the guideline, the highest minimum wage would be 1,280 yen in Tokyo, while the lowest would be 1,079 yen in Kochi, Miyazaki and Okinawa prefectures.

Citing the impact on daily life of the Middle East conflict and other factors, labor representatives had called for an average increase of 75 yen, exceeding last year's guideline increase. Employer representatives, meanwhile, urged restraint as surging materials prices were also driving up business costs.

In fiscal 2025, the guideline called for a 63 yen hike on average but the local panels ultimately raised it by 66 yen.

Article source:  https://mainichi.jp/english/articles/20260729/p2g/00m/0bu/025000c

Japan Economy: Ideas Later. Updated July 26, 2026.

Japan economy may surpass 73-month postwar growth record in July

Ideas

The government, as a way to not upset or scare the financial markets, always tries to spin the economic situation as being positive and or a recovering moderately even though there might some sectors not doing so well.

And yes, the Japanese economy might have grown 73 consecutive months but mostly likely the expansion or growth, while positive, might be considered minimal growth at best.

The economic growth, yes positive, as not been enough to really help Japanese households or even some some business such as small and mid-size companies in Japan.

And of course the cost of living continues to be a significant factor in Japan as even again small and mid-size companies continue to struggle costs which seems to be not out of control but rather enough to stress out households and businesses in Japan.

Most likely the Cabinet Office panel, to make sure the financial markets and large companies are placated will say in one way or another that the economy did expand for 73 months, even though again, the expansion can be described as just minimal.

And yes, even though, to be positive, despite significant global situations, the Japanese economy while not that strong has been able to ignore or by-pass many of the disturbances affecting many other countries.

Of course like all leaders of a country, or most anyway, they need and want to say "everyone across Japan can really feel that 'the economy is getting better," when in reality, as with most countries, these days, not everyone is feeling the economy is getting better but they have to say it anyway.

And yes, they want to see everyone is doing better because of the economy is doing better, but unfortunately, in a market economy, because of the increase in inequality, there are some who are doing better and some who are not doing better.

Yes personal consumption or consumer spending might be solid being about half of Japan's GDP, but at the same time, it might not be enough to actually help the expansion be even better, and while wage hikes are good and needed, they need to be continued with even more, with even more, if possible, from small and mid-size companies make up about 70 percent of the workforce is in Japan and not the large name-brand companies which make up maybe 30 percent of the workforce.

Yes government subsidies are needed and important for many Japanese households as their disposable income, ever since the pandemic continues to be eroded.

Capital investment or company spending is very important if the economy is robust and most likely its a good metric that shows companies in Japan are bullish on the economy and are willing to spend significantly as need.

But here is the challenge or maybe the blind spot that is missing here, as back in the late 1990's when the global economy was at its peak and booming no one really saw or thought that there might be a dot.com bust which could be on the horizon related to artificial intelligence and semiconductors.

Its looks like since the so-called US tariff situation has resolved but you can really never know for sure, demand for Japanese cars in Japan has grown again and but at the same time there is still the challenge of inflation in the US that is affecting many families too.

And of course Japanese government officials are going to say its going to take some time, as they don't want to say anything negative as again they don't want to upset to financial markets in Japan or globally, so they are taking a wait and see approach for as long as they can.

And that seems to how Japan does things by taking a lot of time to decide something looking at all the possibilities and even scenarios to a situation while, good or not so good, for most the the time, the US is much different in how they makes decisions.

Yes, that statement, "its hard to be genuinely happy at a time when is uncertain whether inflation-adjusted real wages will keep rising," as here the Japanese government is not only being realistic but at the same time being somewhat in concert with the rest of Japan might everything is not good or feels good even though there might actually be 73 months of economic expansion.

The problem is many household probably haven't felt the economic expansion due to the continued inflation situation in Japan along the idea, again, that up to 70 percent of the Japanese workforce don't work for the large name-brand companies but small and mid-size companies that are unable to match or give the same wage increases that the large companies can give.

Have a nice day!

Article source:  https://mainichi.jp/english/articles/20260723/p2g/00m/0bu/018000c

BOJ Position: Updated July 23, 2026.

BOJ to stand pat on rates in July, may raise growth forecast.

Ideas

The Bank of Japan always seems, recently, to say its looking into the situation about the economy, and for the most part, never jumps to quick decision making as increasing the key rate can sometimes have significant side affects to many in the economy.

Yes, there might be strong demand for artificial intelligence products but at the same time, it might not be so strong as it might just be too soon to see whats going on as a month here or there of strong demand doesn't mean it will hold for a year.

And yes, economic growth might finally be trending upward but again an month here there or even a quarter here or there of positive growth doesn't mean growth for a year so more needs to be seen in the coming months.

Again, the BOJ is going to take its time to see just how much the increase in the key rate is affecting business and households and for a very long time, the BOJ's position was the Japanese economy was just to weak to be able to handle a key rate increase so it will be interesting to see just what is stance is now related to the latest rate hike.

And the latest statement that it would allow the bank to asses the impact is maybe communication to the financial markets that its not going to do increase the rate in July as it sometimes, like most central banks, they talk in code to communicate what they might do in the future.

The main targets, usually, that a central bank wants to manage or help control in an economy is inflation and unemployment and as unemployment is not a major problem these days for the BOJ as Japan is supposedly in the midst of a labor shortage but inflation has been a challenge for the Japanese economy almost since the beginning of COVID and to this day inflation is still not under control in Japan, as Japanese households are still experiencing increased prices and now the energy situation could get even worse.

And then there is the weak yen, which can be both a positive and a negative depending if it's an export company or companies in Japan that don't export. For example a weak Japanese yen actually gives more money or yen to Japanese export companies as the price of their products will be higher but at the same time for domestic companies in Japan that don't export, as Japan is a resource-poor country, Japan has to import much of what it needs meaning, due to the weak yen import prices are going to be much higher which potentially can put the entire economy under significant stress.

Its highly unlikely that the Japanese economy is going to overheat unless you use the idea that continued inflation over 3 percent is enough to say that an economy is close to or is overheating but the Japanese economy, for the most part, has been around 3 percent or a little under it for a very long time.

And then there is the idea of unemployment and while Japan does have a significant challenge with unemployment at this time, but usually with unemployment its about an economy that is running at full steam and companies can't find enough workers, but in Japan's case the economy is not running at full steam, as its just beginning to grow after a period of stagnation and even though some reports and articles might suggest the Japanese economy is nearing a record for so many months of economic growth, the growth, while still growth, has been minimal at best, and the Japanese economy might be growing ever so slowly its not growing significantly enough to say the economy is overheating in any sense of the word.

And yes, the BOJ might decide to increase the rate but the increase might be very slight as to not cause a lot of side effects on the economy.

Have a nice day!

 Article source: https://mainichi.jp/english/articles/20260717/p2g/00m/0bu/040000c

Japan and Foreign Visitors: Updated July 16, 2026.

Foreign visitors to Japan dip 2% in 1st-half 2026 as Chinese travelers drop

Ideas

A 2.0 percent decrease from a year earlier should not be that much of a concern considering some in Japan now think there are too many foreign tourists entering Japan. And the idea there was a decrease in Chinese tourists should make some happy as again, there have been complaints lately of too many tourists and over-tourism has become a real challenge in Japan now.

It's interesting, as maybe not all Chinese tourists are following exactly what the government wants or says as sometimes a suggestion can be like an order in China, but if there were 2.06 million tourists from China that indicates maybe they can make their own choices without government interference.

It's also interesting that as early as 2019 or around there, South Korea had a supposed boycott on Japanese products and even traveling to Japan was limited as South Korean tourists and travelers avoided going to Japan but those days seem long gone as other articles have suggested that South Korean tourists are the number one group entering Japan or close to it.

Taiwan, compared to China and South Korea has always had a friendly relationship with Japan and they haven't had any of the post-war entanglements that the other two countries have had and as a result tourists from Taiwan has remained consistent while both China and South Korea have had periods of less than normal relations, kind of like squabbling siblings going back and forth over the years.

It seem, unfortunately, whether deserved or not or whether deliberate or not, Japan keeps saying things that seem to upset China and has at times also upset South Korea from time to time but these days South Korea and Japan seem to be going out of their way to make sure all things are normal as maybe they are looking at China as the main instigator in the Asia-Pacific region and both countries seem to be working together now on diplomatic and security issues.

But as mentioned above there were 2.06 million visitors from China that visited Japan, so there are still quite a few who want to go to Japan and spend their money.

It's quite possible that a decrease of 6.8 percent from a year earlier might be just enough to satisfy those in Japan who think and feel that over-tourism has overtaken Japan and some might want to see even less tourists.

The problem is the Japanese domestic economy is now heavily dependent on foreign tourism for spending as overall, consumer spending in the domestic economy is now where it should be due to the continued inflation situation.

As the Japanese yen is very weak now, which gives foreign tourists more purchasing power Japanese businesses should welcome foreign tourists with open arms as they spend a lot when they are in Japan despite, unfortunately, there are always going to be some who have poor manners in Japan like some tourists in all countries these days.

Have a nice day!

Article source:    https://mainichi.jp/english/articles/20260715/p2g/00m/0li/056000c