TechFlow News, March 19: Shigeto Nagai, Head of Japan Economics at Oxford Economics, stated that, given the risk of Japan’s economy slipping into stagflation, we now expect the Bank of Japan to delay its next interest rate hike from June to July. Thereafter, the central bank is projected to continue raising rates gradually in Q1 and Q3 of 2027. In the short term, rising energy costs will reignite supply-side-driven inflation. We now anticipate core CPI will not return to 2% until Q2 2027—not Q4 2026. Although spring wage negotiations are expected to yield robust results, higher inflation will constrain real income growth.
As a result, we have lowered our 2026 real GDP growth forecast by 0.4 percentage points to 0.3%. Despite concerns over inflation expectations and yen weakness, we believe the Bank of Japan may adopt a more cautious stance on rate hikes, prioritizing their impact on corporate profits and real household income. (Jinshi)
