BOJ Maintains Inflation Warning as Risk Outlook Eases

The Bank of Japan is likely to maintain its warning about inflation risks next week but indicate that those risks have not increased significantly from three months ago, according to sources familiar with its thinking.

The BOJ's quarterly outlook report due at next week's policy meeting will highlight lingering inflation risks stemming from the Middle East conflict, robust global AI demand, and rising import costs from a weak yen, the sources said.

However, policymakers believe the likelihood of a worst-case scenario, in which severe supply disruptions trigger a sharp surge in prices and force rapid interest-rate hikes, has diminished from three months ago, according to the sources.