Bank of Japan: High oil prices and a weak yen may keep core inflation around 3% for two consecutive years

Golden Finance reports that on April 30th, the Bank of Japan released a risk scenario on Thursday showing that, assuming oil prices remain high and the yen weakens, core inflation will hover around 3% for two consecutive years, significantly above its 2% target.
In the baseline scenario released on Tuesday, the Bank of Japan stated that it expects the core consumer price index (CPI) for the current fiscal year ending March 2027 to rise by 2.8%, and by 2.3% in the next fiscal year.
On Thursday, the Bank of Japan unusually released a set of risk scenarios assuming that crude oil prices stay around $105 per barrel by the end of the year, the yen depreciates by 10% from current levels, and the stock market falls by 20%.
Under this risk scenario, core inflation would rise to 3.1% in fiscal year 2026, 3.0% in 2027, and then fall back to 2.3% in 2028.
The report states: “Notably, it is expected that inflation will remain around 3% for two consecutive years in fiscal years 2026 and 2027.”
The report also notes: “This upward deviation in CPI could become a factor in pushing up long-term inflation expectations.” (Jin10)