Minutes of the Monetary Policy Meeting on March 18 and 19, 2026

A Monetary Policy Meeting of the Bank of Japan Policy Board was held in the Head Office of the Bank of Japan in Tokyo on Wednesday, March 18, 2026, from 2:00 p.m. to 3:53 p.m., and on Thursday, March 19, from 9:00 a.m. to 11:39 a.m. The Bank had been conducting money market operations in accordance with the guideline for money market operations decided at the previous meeting on January 22 and 23, 2026. The uncollateralized overnight call rate had been in the range of 0.727 to 0.736 percent. Meanwhile, the Bank had conducted Japanese government bond (JGB) purchases of about 2.9 trillion yen per month in accordance with the JGB reduction plan decided at the June 2025 meeting. In the money market, the uncollateralized overnight call rate had been at around 0.75 percent. The general collateral (GC) repo rate had been at around the same level as the uncollateralized overnight call rate. As for interest rates on term instruments, yields on three-month treasury discount bills (T-Bills) were more or less unchanged. The Tokyo Stock Price Index (TOPIX) was more or less unchanged over the intermeeting period; it had risen following the House of Representatives election, but had subsequently declined, affected by the situation in the Middle East. Yields on 10-year JGBs were more or less unchanged, reflecting market attention to inflationary pressure and to concerns over an economic downturn, both of which stemmed from the situation in the Middle East. The liquidity indicators in the JGB markets continued to improve on the whole. In the foreign exchange market, the yen had been more or less flat against both the U.S. dollar and the euro over the intermeeting period, albeit with fluctuations. Overseas economies had grown moderately on the whole, although some weakness had been seen in part, reflecting trade and other policies in each jurisdiction. The U.S. economy maintained solid growth on the whole, although some weakness had been seen in part. European economies had shown resilience, particularly in domestic demand, although weakness remained in part. The Chinese economy had decelerated, mainly due to the impact of tariff increases and the gradually diminishing effects of government policies, and as adjustment pressure continued in the real estate and other markets. Emerging and commodity-exporting economies other than China had improved moderately on the whole. As for the outlook, with the expectation that the situation in the Middle East would gradually moderate, overseas economies were projected to return to a growth path, partly supported by global AI-related demand, even as downward pressure stemming from the impact of trade and other policies in each jurisdiction was expected to remain. Regarding the outlook, attention was warranted for the time being on the future course of the situation in the Middle East and on how this would affect global financial markets and the global economy; in addition, there remained high uncertainties over, for example, the impact of trade policy in each jurisdiction and over developments in global AI-related demand. With respect to overseas financial markets, since the turn of March 2026, market sentiment had deteriorated significantly in the wake of increased tension over the situation in the Middle East. U.S. stock prices had declined, partly due to concerns over developments in AI-related sectors and to risk-off moves among market participants reflecting the situation in the Middle East. European stock prices had declined, affected by the situation in the Middle East. U.S. long-term interest rates had fallen due to weak economic indicators, but had subsequently risen reflecting market attention to inflationary pressure in the wake of the situation in the Middle East. European long-term interest rates had moved in line with developments in U.S. long-term interest rates. Meanwhile, currencies in emerging economies had depreciated amid the U.S. dollar's appreciation due to the increased tension over the situation in the Middle East. Crude oil prices had risen significantly, mainly against the background of the de facto closure of the Strait of Hormuz. Japan's economy had recovered moderately, although some weakness had been seen in part. Regarding the outlook, the economy was likely to continue growing moderately, with overseas economies returning to a growth path, and as a virtuous cycle from income to spending gradually intensified, supported by factors such as the government's economic measures and accommodative financial conditions, while the economy was projected to be affected by trade and other policies in each jurisdiction. However, in the wake of the increased tension over the situation in the Middle East, global financial and capital markets had been volatile and crude oil prices had risen significantly; future developments warranted attention. Exports continued to be more or less flat as a trend. Regarding the outlook, they were likely to remain more or less flat for a while. This was because, although solid global AI-related demand was expected to push up exports, mainly of IT-related and capital goods, the increased tension over the situation in the Middle East was projected to lead to a decline in automobile exports to the Middle East and push down production and trade activity in manufacturing through the emergence of bottlenecks on the supply side and through heightened uncertainties. Industrial production continued to be more or less flat from a somewhat long-term perspective. Regarding the outlook, industrial production was expected to remain more or less flat on the whole. This was because, although it was likely to be pushed up by solid global AI-related demand and resilient domestic demand that was partly supported by the government's economic measures, industrial production was projected to be pushed down by production adjustments in the basic materials industry and by heightened uncertainties, both of which were due to the increased tension over the situation in the Middle East. Corporate profits remained at high levels on the whole, although downward effects due to tariffs had been seen in manufacturing. In this situation, business fixed investment had been on a moderate increasing trend. With regard to the outlook, business fixed investment was likely to continue on an increasing trend, supported by moves to clear order backlogs and by labor-saving investment to address labor shortages; that said, downward pressure was likely to be gradually exerted on business fixed investment from a deceleration in corporate profits due to higher crude oil prices and from a rise in construction costs. Private consumption had been resilient against the background of an improvement in the employment and income situation, although it had been affected by price rises. The consumption activity index (CAI; real, travel balance-adjusted) had been flat for the October-December quarter of 2025, but had increased for January 2026 relative to that quarter, mainly for nondurable goods, such as beverages and food. Based on anecdotal information from firms, statistics published by industry organizations, and high-frequency indicators, private consumption since February seemed to have declined slightly from the previous month. Consumer sentiment had seen a clear improvement recently, as the year-on-year rate of change in real wages had turned positive and projected inflation had clearly declined, both of which reflected (1) a decline in the rate of increase in food prices and (2) the government's measures to reduce the household burden of higher energy prices. Regarding the outlook, private consumption was expected to remain resilient for the time being, supported by a rise in employee income and by government measures to address rising prices, but downward pressure stemming from higher energy prices was likely to intensify from spring 2026. The employment and income situation had improved moderately. The year-on-year rate of change in the number of employed persons had been at 0 percent, pushed down by a decline in the number of self-employed persons. Nominal wages per employee continued to increase steadily, albeit with fluctuations. With regard to the outlook, employee income was likely to continue to see a steady increase at its current pace for the time being, albeit with fluctuations. As for prices, in international commodity markets, crude oil prices had risen significantly recently, against the background of the increased tension over the situation in the Middle East. Copper prices had also seen a clear increase. Meanwhile, market prices of food had been on a moderate declining trend. The year-on-year rate of increase in the producer price index (PPI) had been on a decelerating trend, mainly due to the past decline in crude oil prices and the deceleration in the pace of increase in food prices, such as rice prices, and had been at around 2 percent recently. The year-on-year rate of increase in the services producer price index (SPPI, excluding international transportation) had been on a decelerating trend, being at around 2.5 percent recently, primarily because the impact of the price hikes seen in fiscal 2024 had dissipated, although the rate itself remained relatively high, mainly on the back of a rise in personnel expenses. With moves to pass on wage increases to selling prices continuing, the year-on-year rate of increase in the consumer price index (CPI, all items less fresh food) had been above 2 percent, partly due to the effects of the rise in food prices, such as rice prices; however, the rate of increase had recently fallen to around 2 percent due to factors such as the effects of the government's measures to reduce the household burden of higher energy prices. Inflation expectations had risen moderately. With regard to the outlook, the year-on-year rate of increase in the CPI was likely to temporarily decelerate to a level below 2 percent in the short run, with the waning of the effects of the rise in food prices, such as rice prices, and pushed down by a decline in energy prices reflecting the government's measures to reduce the household burden of higher energy prices; thereafter, however, the rate of increase was expected to come under upward pressure again, affected by the surge in crude oil prices. Japan's financial conditions had been accommodative. Real interest rates had been negative. Firms' funding costs had increased. Firms' demand for funds had increased moderately on the back of, for example, the recovery in economic activity as well as mergers and acquisitions of firms. With regard to credit supply, financial institutions' lending attitudes as perceived by firms had been accommodative. Issuance conditions for CP and corporate bonds had been favorable. In this situation, the year-on-year rate of increase in the amount outstanding of bank lending had been at around 5 percent; that in the aggregate amount outstanding of CP and corporate bonds had been in the range of 7.0-7.5 percent. Firms' financial positions had been favorable. The number of bankruptcies of firms had been more or less flat. Meanwhile, the year-on-year rate of change in the money stock had been in the range of 1.5-2.0 percent. With regard to global financial and capital markets, members shared the view that since the turn of March 2026, market sentiment had deteriorated significantly in the wake of increased tension over the situation in the Middle East. Some members expressed the recognition that, with crude oil prices rising significantly, volatility in financial markets had risen, as seen in, for example, the decline in stock prices in major economies. One of these members pointed out that the so-called flight to quality seemed to have been constrained even with risk sentiment becoming cautious, and that this was partly because the formation of government bond yields had been affected by factors such as growing global concerns over rising inflation. Members shared the recognition that overseas economies had grown moderately on the whole, although some weakness had been seen in part, reflecting trade and other policies in each jurisdiction. As for the outlook, they concurred that, with the expectation that the situation in the Middle East would gradually moderate, overseas economies were projected to return to a growth path, partly supported by global AI-related demand, even as downward pressure stemming from the impact of trade and other policies in each jurisdiction was expected to remain. A few members pointed out that future developments in overseas economies depended on the extent to which possible negative shocks arising from the situation in the Middle East would be offset by demand for IT-related goods, fiscal policy in each jurisdiction, and other factors. These members then expressed the view that, in light of the recent strength in global demand for IT-related goods and expansionary macroeconomic policy in each jurisdiction, a significant slowdown in the global economy and resulting downward deviation in prices was unlikely to occur, at least in the current baseline scenario. Members agreed that the U.S. economy maintained solid growth on the whole, although some weakness had been seen in part. A few members expressed the recognition that the impact of tariffs, which had been a major concern associated with corporate activities and prices, remained limited. Some members were of the view that the recent substantial increase in AI-related investment had been the driving force of the U.S. economy, although the expansion of the AI boom could cause uncertainty about the employment situation in the United States and business conditions for the country's software-related firms competing with AI-related firms. One member noted that, currently, there were no indicators showing significant changes in the U.S. price situation and labor market conditions. The member then stated that if the economy continued to see mixed conditions in this way, the process of very moderate cuts in the U.S. policy interest rate could be expected to continue. Meanwhile, regarding characteristics of AI-related investment in the United States, one member noted that active use had been made of the private credit market, and that risks had been transferred to a wide range of investors through, for example, the structuring of securitized products. The member continued that, since it had been difficult to identify where the risks lay, financial developments warranted careful monitoring. Members shared the recognition that European economies had shown resilience, particularly in domestic demand, although weakness remained in part. Members shared the view that the Chinese economy had decelerated, mainly due to the impact of tariff increases and the gradually diminishing effects of government policies, and as adjustment pressure continued in the real estate and other markets. Members shared the recognition that emerging and commodity-exporting economies other than China had improved moderately on the whole. Based on the above deliberations on economic and financial conditions abroad, members discussed the state of Japan's economy. With regard to economic activity, members shared the view that Japan's economy had recovered moderately, although some weakness had been seen in part. Many members expressed the recognition that economic data for the past few months, which did not include the effects of the increased tension over the situation in the Middle East, indicated that the virtuous cycle from income to spending had been maintained in both the corporate and household sectors. These members continued that the data were generally in line with the Bank's outlook in the January 2026 Outlook for Economic Activity and Prices (Outlook Report). One of these members added that the recent solidity in the domestic economy was seen in, for example, figures for the October-December quarter of 2025 for private consumption and business fixed investment in real GDP statistics and those for corporate profits and business fixed investment in the Financial Statements Statistics of Corporations by Industry. On the other hand, a different member pointed out that, while Japan's economy remained resilient, economic downside effects stemming from the increased tension over the situation in the Middle East -- such as rising gasoline prices -- had already started to emerge, and that future developments would continue to warrant attention. As for the outlook for economic activity, members concurred that Japan's economy was likely to continue growing moderately, with overseas economies returning to a growth path, and as the virtuous cycle from income to spending gradually intensified, supported by factors such as the government's economic measures and accommodative financial conditions, while the economy was projected to be affected by trade and other policies in each jurisdiction. On this basis, they also shared the recognition that, in the wake of the increased tension over the situation in the Middle East, global financial and capital markets had been volatile and crude oil prices had risen significantly, and that future developments warranted attention. Many members expressed the recognition that the impact of the situation in the Middle East on Japan's economy depended heavily on how long and in what form the situation as seen currently would continue. These members continued that, as future developments were unclear, there was not enough information at present for the Bank to revise its baseline scenario of the outlook. In relation to this, one member pointed out that the situation in the Middle East and the associated rise in crude oil prices should be considered as a risk scenario, and it was necessary to carefully examine their impact on markets and the economy. On this basis, the member expressed the view that so far, excessive reactions had been contained in Japan, partly due to expectations surrounding the government's policies, and that the degree of the impact could vary depending on future developments. This member continued that there was thus no need to revise the baseline scenario for economic activity and prices at this point. Meanwhile, one member noted that Japan's potential growth rate in recent years had been supported by solid total factor productivity (TFP). The member then expressed the recognition that, looking ahead, the extent to which there remained room for an increase in working hours and whether appropriate investment was made amid changing circumstances would also be key issues. Members shared the recognition that exports and industrial production continued to be more or less flat as a trend. In relation to services exports, one member expressed the view that inbound tourism demand remained favorable on the whole, on the back of the yen's depreciation, and that the impact of the decline in the number of Chinese tourists remained limited, despite previous concerns. With regard to the impact on exports of the increased tension over the situation in the Middle East, one member pointed out that, although the share of exports to the Middle East was not so large for both goods and services, Japan's exports could be indirectly affected through trade with economies such as Asia and Europe. The member then commented that, regarding IT-related exports, which had been mainly directed toward the NIEs and ASEAN economies, the recent rise in memory prices had improved Japan's terms of trade, and close attention was warranted on whether this situation would change. Members shared the recognition that business fixed investment had been on a moderate increasing trend, with corporate profits remaining at high levels on the whole, despite being affected by tariff policies. One member expressed the view that Japanese firms maintained their positive business fixed investment stance, aiming to address geopolitical risks and explore new areas of growth, and that, regarding the outlook, they were also likely to continue labor-saving investment and investment to facilitate digital transformation, with tightening labor market conditions. One member expressed the recognition that business fixed investment was expected to remain solid, considering factors such as the expansion in AI-related demand, high levels of corporate profits, and the government's support for focused investment in 17 strategic sectors. Meanwhile, regarding corporate profits, a few members said that, while U.S. tariff policy had pushed down the profits of some automakers, the simultaneous expansion of the AI boom had significantly pushed up the profits of semiconductor-related firms. These members continued that, as a result of this and other factors, listed firms' full-year financial results for fiscal 2025 were expected to reach record high levels. A different member expressed the recognition that, as far as the Tankan (Short-Term Economic Survey of Enterprises in Japan) data suggested, profits after tax for small and medium-sized firms had seen a clear increase in many industries, compared with five years ago, and it seemed that favorable business performance in recent years had spread throughout the corporate sector, regardless of firm size. Members concurred that private consumption had been resilient against the background of the improvement in the employment and income situation, although it had been affected by price rises. One member expressed the recognition that a recent significant change was that private consumption, which had been pushed down by high prices, had finally started to turn upward, as moves to raise food prices, including rice prices, had waned. One member pointed out that, considering that it was the period before annual wage increases took effect, private consumption had shown solid developments, partly supported by government subsidies for gasoline prices, electricity charges, and gas charges. On this basis, the member noted that the government's income transfer measures were set to continue into fiscal 2026, as exemplified by the expansion of free high school tuition and the introduction of free elementary school lunches. This member continued that these measures were expected to push up consumption through an increase in households' disposable income. Members shared the view that the employment and income situation had improved moderately. A few members pointed out that, partly due to government measures to address rising prices, the rate of increase in the CPI had seen a clear decline, and that the rate of change in real wages, which had been in negative territory for a long time, had recently turned positive. Meanwhile, with regard to the annual spring labor-management wage negotiations, most members expressed the view that many large firms had met in full or nearly full the demands of their labor unions, and it was highly likely that a wide range of firms would continue to raise wages steadily in 2026. A few members said that, although large firms were likely to raise wages steadily, it was necessary, considering the situation in the Middle East, to continue to monitor developments toward the overall final outcome of labor-management wage negotiations, including those at small and micro firms. One of these members added that there was a strong tendency for business managers in Japan to give consideration to moves by other firms in the same industry and keep in line with them when deciding on their own wage-setting stance. The member continued that close attention was therefore warranted on whether uncertainties surrounding the situation in the Middle East would affect the trend of wage hikes among small and medium-sized firms. In relation to this, noting that there had been reports from small and micro firms since 2025 that they were struggling with the need to raise wages as a defensive step, a different member expressed the view that, when examining the wage growth rates of these firms, it was necessary to carefully analyze whether such structural factors were affecting these rates or whether the uncertainties surrounding the situation in the Middle East were affecting them. As for prices, members agreed that, with moves to pass on wage increases to selling prices continuing, the year-on-year rate of increase in the CPI (all items less fresh food) had been above 2 percent, partly due to the effects of the rise in food prices, such as rice prices. They continued that, however, the rate of increase had recently fallen to around 2 percent due to factors such as the effects of the government's measures to reduce the household burden of higher energy prices. In addition, members concurred that inflation expectations had risen moderately. A few members expressed the recognition that, as the rise in food prices, including rice prices, had started to subside recently, the Bank's outlook to date that the CPI inflation rate would temporarily decelerate due to cost-push factors subsiding was becoming a reality. One member noted that, while rice prices had started to decline reflecting the supply and demand conditions for rice in the distribution process, price levels remained relatively high. The member then expressed the view that this was one example of prices being less likely to return to pre-surge levels once benchmark and market prices were formed. On this basis, the member said that expectations of higher food prices among consumers as such might have been affecting underlying inflation, and that close attention was warranted on the spillovers from these price trends to prices of items other than food. One member stated that the rate of increase in the price of processed food that does not use rice as an ingredient remained elevated in the range of 5.0-6.0 percent. The member then noted that there had been an increasing number of reports pointing out that the recent rise in food prices stemmed from increased personnel expenses and distribution costs, rather than high raw material costs such as international commodity prices and rice prices. This member continued that, however, the rise in food prices was notable even compared with the rates of increase in personnel expenses and distribution costs. A different member expressed the view that the year-on-year rate of increase in the CPI for Tokyo's 23 wards for February 2026 had decelerated, as projected, due to the effects of government policies, such as the abolition of the provisional gasoline tax rate, and to the reactionary decline following the significant price rises in 2025, mainly of food. The member continued that looking at the CPI by item, however, prices of services, such as dining-out, hotel charges, and cram school fees, continued to reflect increases in personnel expenses. With regard to the outlook for prices, most members shared the recognition that the year-on-year rate of increase in the CPI (all items less fresh food) was likely to temporarily decelerate to a level below 2 percent, with the waning of the effects of the rise in food prices, such as rice prices, and partly due to the effects of government measures to address rising prices. These members continued that the rate of increase was then expected to come under upward pressure, affected by the recent rise in crude oil prices. In addition, members shared the view that, meanwhile, the mechanism in which wages and prices rise moderately in interaction with each other was likely to be maintained, and, thereafter, it was projected that a sense of labor shortage would grow as the economy continued to improve and that medium- to long-term inflation expectations would rise. On this basis, most members shared the recognition that underlying CPI inflation was expected to increase gradually and, in the second half of the projection period of the January 2026 Outlook Report, be at a level that was generally consistent with the price stability target. Members concurred that attention should also be paid to the impact of the rise in crude oil prices on the outlook for underlying CPI inflation. One member pointed out that "beginning-of-the-period price hikes" by firms would serve as an indicator for assessing whether underlying inflation would rise moderately. The member then commented that developments in services prices in particular warranted attention, given their relationship with wages. One member noted that the rate of increase in the price of goods excluding food and energy and of services had been at around 1.5 percent, remaining stable below 2 percent. On this basis, the member expressed the recognition that underlying inflation appeared still to be below 2 percent, and this was not a situation where a sharp increase in inflation should be of concern, assuming that the rise in food prices would subside. A different member pointed out that underlying inflation had not been sufficiently anchored at 2 percent yet. The member then expressed the view that, while attention had so far been paid mainly to downside risks, there was also the possibility that underlying inflation would exceed 2 percent, depending on the future course of the situation in the Middle East. In addition, one member expressed the recognition that, if it could be confirmed that wage hikes in the annual spring labor-management wage negotiations were at a level in line with the price stability target for the third consecutive year, it could be judged as early as April 2026 that the underlying trend in prices had reached 2 percent. The member then said that an examination of factors such as firms' and households' inflation expectations and firms' price-setting behavior was required, using sources such as the March 2026 Tankan, the March 2026 Opinion Survey on the General Public's Views and Behavior, and anecdotal information from firms. Meanwhile, one member expressed the recognition that the level of the rate of increase in the CP