Kazutaka Maeda, Senior Economist at Meiji Yasuda Research Institute, noted that the outlook report indicates the Bank of Japan has shifted its policy focus further toward upside risks to inflation and economic activity, as it takes a more optimistic view of exports and capital expenditure driven by artificial intelligence (AI)-related demand.
Although its inflation forecasts remain broadly consistent with the 2% target overall, the BOJ appears increasingly aware of the possibility that inflation could overshoot.
The BOJ may no longer adhere to its previously assumed pace of one rate hike every six months, and is instead considering raising rates once every three months, which makes the December policy meeting a reasonable timing for the next rate hike.
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