BOJ risk scenario sees inflation near 3 percent for 2 years

The Bank of Japan (BOJ) in Japan projects core inflation will hit 3.1% in fiscal 2026 under a newly released risk scenario. This exceeds the 2% target and the baseline forecast of 2.8% for the current fiscal year. Sustained 3% inflation could force the BOJ to adjust its medium-term policy path and inflation expectations.

The BOJ quarterly outlook report, released Thursday morning, assumes a scenario where West Texas Oil remains near $105 per barrel through the year-end. This model also factors in a 10% weakening of the yen against USD/JPY from current levels and a 20% decline in stock prices.