The Bank of Japan predicts that high oil prices and weak yen may lead to core inflation of about 3% for two consecutive years

According to the risk scenario forecast released by the Bank of Japan on Thursday, assuming that oil prices remain high and the yen depreciates, core inflation will rise to 3.1% in the 2026 fiscal year and 3.0% in 2027, maintaining around 3% for two consecutive years. The baseline scenario shows that the core CPI for the current fiscal year ending in March 2027 is expected to rise by 2.8%, and for the next fiscal year it will be 2.3%. The risk scenario assumes that crude oil prices will remain at $105 per barrel until the end of the year, the Japanese yen will depreciate by 10%, and the stock market will fall by 20%. The report suggests that this upward trend in inflation may affect medium - to long-term inflation expectations.