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, Hyogo, 25 June 2026.
I. Economic Activity and Prices
A. Current Situation and Outlook for Economic Activity in Japan
I will begin my speech by talking about developments in economic activity in Japan. The Bank of Japan assesses that the economy has recovered moderately, although some weakness has been seen in part, partly due to the impact of the situation in the Middle East.
After the announcement of a new U.S. tariff policy in April 2025, there was significant uncertainty regarding its impact on Japan's economy. In this situation, the Bank had to make revisions to its forecasts for real GDP growth, as shown in Chart 1. That said, uncertainty regarding U.S. tariff policy decreased markedly thereafter, as many countries and regions, including Japan, reached agreements in trade negotiations with the United States. With regard to developments in business sentiment, firms have maintained a proactive stance. For instance, the diffusion index (DI) for business conditions in the Tankan (Short-Term Economic Survey of Enterprises in Japan) has stayed at a favorable level, as indicated in Chart 2. Business sentiment did not deteriorate much even after the announcement of the U.S. tariff policy. While it is true that the economy has been boosted by global AI-related demand since then, it can be said that firms' initial views have turned out to be accurate. Against this backdrop, the Bank revised its forecasts for real GDP growth in the January 2026 Outlook for Economic Activity and Prices (Outlook Report) for both fiscal 2025 and 2026 to broadly the same levels 1 as projected in the January 2025 Outlook Report, which was released before the U.S. tariff policy announcement.