Standard Chartered analysts Nicholas Chia and Chong Hoon Park have highlighted new economic indicators released by the Bank of Japan (BoJ) in late March, which show underlying inflation is near or above the central bank’s 2% target. These indicators exclude institutional factors such as government subsidies, providing a clearer picture of inflationary pressures in Japan [1]. Additionally, the output gap has been estimated as positive since Q1 2022, suggesting that actual economic growth has been running ahead of potential, a shift from previous estimates that indicated a persistently negative output gap [1].
The BoJ has assessed the neutral rate range as broadly unchanged at 1.1-2.5% in nominal terms [1]. Despite these signals of robust inflation and growth, Standard Chartered analysts note that the BoJ’s policy stance remains accommodative. They argue that this backdrop could justify further rate hikes, although they caution that meeting market expectations for two hikes in 2026 may present a high hurdle [1].
No specific market reactions or forward-looking analyst opinions beyond the challenge of meeting rate hike expectations in 2026 are discussed in the article [1].
CONCLUSION
Recent BoJ data indicate underlying inflation above target and a positive output gap, supporting the case for further tightening. However, Standard Chartered analysts believe achieving market expectations for two rate hikes in 2026 will be difficult. The market may interpret these signals as a medium-impact development, with future policy moves remaining uncertain.