Naoki Tamura: Economic activity, prices and monetary policy in Japan

Speech by Mr Naoki Tamura, Member of the Policy Board of the Bank of Japan, at a meeting with local leaders, Okinawa, 16 October 2025.

The views expressed in this speech are those of the speaker and not the view of the BIS.

I. Economic Activity and Prices

A. Current Situation of and Outlook for Economic Activity and Prices

I will begin my speech by talking about developments in economic activity in Japan. The Bank of Japan assesses that the economy has grown moderately on the whole, although some weakness has been seen in part.

There was significant uncertainty regarding the future course of U.S. tariff policy and its impact on Japan's economy, and the Bank had to make revisions to its forecasts for real GDP in April and July 2025, as shown in Chart 1. In terms of the medians of the Policy Board members' forecasts -- as presented in the January 2025 Outlook for Economic Activity and Prices (Outlook Report) -- the forecast for Japan's real GDP growth rate was 1.1 percent for fiscal 2025 and 1.0 percent for fiscal 2026, indicating that Japan's economy was expected to see relatively firm growth. However, given the U.S. tariff policy announced in April 2025, the Bank's forecasts were revised substantially downward in the April Outlook Report, to 0.5 percent for fiscal 2025 and 0.7 percent for fiscal 2026. That said, how U.S. tariff policy would turn out and how firms would respond to the policy were both fluid at the time the Bank made its forecasts in April. The Bank's April forecasts were therefore likely to be revised considerably, either upward or downward, depending on future developments.