Impact of BOJ Monetary Policy and Consumption Tax Cut on CPI Ex Institutional Factors

Mizuho projects the BOJ will increasingly ignore official CPI inflation due to distorted figures caused by government subsidies and upcoming tax cuts. Consequently, they expect the policy rate to climb to 1.50% by mid-2027 based on their proprietary inflation metrics.

Key Takeaways

• 1.The BOJ is increasingly focused on a version of CPI that excludes institutional factors, which is currently running at 2.7% YoY, significantly higher than the official core CPI figure.
• 2.Anticipated consumption tax cuts on food products in April 2027 will create significant distortions in official CPI data, causing the BOJ to rely more heavily on its custom index for policy decisions.
• 3.Mizuho forecasts the BOJ will continue raising interest rates to a terminal rate of 1.50% by June 2027.

Table of Contents

• Impact of BOJ monetary policy and consumption tax cut on CPI ex institutional factors
• CPI inflation (excluding institutional factors) likely to remain relatively high during FY2026, but...
• Price impact of lowering consumption tax on food products to 1%
• Important Disclosure Information
• Analyst Certification
• Disclaimer

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